Q&A: When student debt payoff becomes complicated by identity theft

Dear Liz: I went back to school in 2002 to get my teaching credential. I took out several student loans and set up a repayment plan upon graduating with automatic deduction out of my checking account. Several years ago, the IRS started garnishing my bank account stating that there was a lien but I never received any other type of indication what was going on.

After contacting the IRS, we found that someone took out a fraudulent student loan using my former married name. I also got my credit reports, which showed the loan. I was able to get the signed loan documents from the U.S. Department of Education but now the department does not respond to my certified letters or phone calls.

I’m at a loss at what to do at this point. I filed a police report and notified the credit reporting agencies. I’m out almost $10,000. Is there any other advice you could give me?

Answer: First, follow up with the credit bureaus to make sure the fraudulent loan has been removed from your credit reports. Consider setting up credit freezes at all three bureaus to reduce the chances of being victimized again. The Identity Theft Resource Center at www.idtheftcenter.org has more information to help you protect yourself.

Getting the actual loan dismissed and your money back is a more difficult task. You may be able to have the loan erased under what’s known as a false certification discharge, but qualifying for that isn’t easy, said Jay Fleischman, a Los Angeles attorney who specializes in student loan problems.

It’s not enough to have a police report. You’d need to identify and file a lawsuit against the thief. If you can get a court judgment against that person, you would provide the Education Department with that as well as proof of your identity and possibly signature samples from the approximate date of the loan.

Even if you did everything necessary to prove eligibility for discharge, the department could still deny it if you received any benefits from the loan — if it paid any costs of your education instead of someone else’s, Fleishman said.

At this point, you may need to hire an attorney familiar with identity theft issues. You can get referrals from the National Assn. of Consumer Advocates at www.naca.net.

Monday’s need-to-know money news

Today’s top story: How to responsibly handle an inheritance. Also in the news: 7 questions to ask before selling a stock, how to create your own pension, and why 35% of college seniors don’t know what their student loan repayments will be.

How to Responsibly Handle an Inheritance
Don’t run out and buy a sports car just yet.

Selling a Stock? Ask 7 Questions First
What you need to know.

How to Create Your Own Pension
Filling in the gap.

35% of college seniors don’t know what their student loan repayments will be
That’s an alarming number.

Friday’s need-to-know money news

Today’s top story: Three student loan risks parent borrowers should avoid. Also in the news: Why you don’t have to be rich to feel good about your money, how second chance checking reopens doors to banking, and the lazy person’s guide to travel hacking.

3 Student Loan Risks Parent Borrowers Should Avoid
Be careful.

You Don’t Have to Be Rich to Feel Good About Your Money
You don’t need fancy cars and mansions.

Second Chance Checking Reopens Doors to Banking
Bringing back customers.

The Lazy Person’s Guide to Travel Hacking
Rack up miles without becoming obsessive.

Q&A: When a student loan co-signer dies

Dear Liz: I have a friend who recently died after co-signing a student loan for her son. She was making the payments. Does that loan go to her son now to repay?

Answer: Possibly. Another possibility is that her estate is on the hook.

It all depends on the loan agreement, which varies from private lender to private lender. (We know this is a private loan because federal student loans, which have many more consumer protections, do not require co-signers.)

In many cases, nothing happens if the other borrower takes over the payments and continues to make them on time. Some lenders, however, have a contract clause that makes the balance of the loan due immediately. In the past, lenders also could consider a death to be an “automatic default” that could seriously damage the living borrower’s credit. Fortunately, the Consumer Financial Protection Bureau pushed lenders to change their policies on new and existing loans so that co-signer deaths no longer trigger such defaults.

If you’re close to this young man, you should urge him to check the contract and to contact the lender.

Friday’s need-to-know money news

Today’s top story: Caring counselor offers real help in student debt crisis. Staying away from envelope stuffing scams, make money with online surveys, and five mistakes to avoid when paying for college.

Caring Counselor Offers Real Help in Student Debt Crisis
This is how help in the student debt crisis should be.

Stay Away From Envelope-Stuffing Schemes
Don’t get scammed.

Making Money With Online Surveys: What to Expect
There’s money to be made…slowly.

Don’t make these 5 mistakes paying for college
Things to consider.

Thursday’s need-to-know money news

Today’s top story: Cheated by student loan ‘Debt Relief” firm? What you should do. Also in the news: Rules rollback won’t keep defrauded student borrowers from loan forgiveness, 3 costly mistakes beginning investors make, and what to give and spend during Wedding Season.

Cheated By Student Loan ‘Debt Relief’ Firm? What To Do
Important steps to take.

Rule Rollback Won’t Keep Defrauded Student Borrowers From Loan Forgiveness
A little good news.

3 Costly Mistakes Beginning Investors Make
Ignore stock tips.

Weddings: What to give, what not to give, how much to spend
Wedding season is underway!

Wednesday’s need-to-know money news

Today’s top story: Fed point fingers as ‘Debt Relief’ companies prey on student loan borrowers. Also in the news: Distressed borrowers say student debt help was anything but, why investors care about rate hikes, and why your credit cards shouldn’t retire when you do.

Feds Point Fingers as ‘Debt Relief’ Companies Prey on Student Loan Borrowers
Looking for easy targets.

Distressed Borrowers Say Student Debt Help Was Anything But
Compounding a problem.

Why Investors Care About the Fed (and Rate Hikes)
The impact on investments.

Credit hit: Why your credit cards shouldn’t retire when you do
Building credit is still important.

Tuesday’s need-to-know money news

Today’s top story: How to take the heat off your summer budget. Also in the news: How to find out if you’ll owe taxes on an inheritance, 3 things your student loan servicer might not tell you, and what happens to your credit score when you transfer a balance.

How to Take the Heat Off Your Summer Budget
Keep your costs in check.

Find Out If You’ll Owe Taxes on an Inheritance
Don’t spend all that money quite yet.

3 Things Your Student Loan Servicer Might Not Tell You
They’re not always forthcoming.

What Happens to Your Credit Score When You Transfer a Balance?
Looking at the numbers.

Thursday’s need-to-know money news

Today’s top story: How to keep Mother’s Day spending down. Also in the news: How the rise in student loan rates will affect borrowers, where to sell your stuff online, and will you see a Social Security check in your lifetime.

Mother’s Day Spending Is up, but You Can Keep Costs Down
It’s the thought that counts.

How Rise in Student Loan Rates Will Affect Borrowers
What to expect.

Where to Sell Your Stuff Online
Making some extra cash.

Will You See a Social Security Check in Your Lifetime?
What are the odds?

Go nuclear on your debt – move away

Ken Ilgunas paid off $32,000 in student loans two and a half years after graduation — starting with a $9-an-hour job.

With zero job offers in his chosen field of journalism, he instead moved from Wheatfield, New York, to Coldfoot, Alaska, a truck stop and tourist camp north of the Arctic Circle, so he could put every possible dollar toward his debt.

Every possible dollar meant virtually every dollar. His job as cook, maintenance worker and tour guide provided room and board. What Coldfoot (population 10) didn’t provide was places to spend what little he was making.

In my latest for the Associated Press, how literally moving outside of your comfort zone can help you pay off debt faster.