Unfortunately, information vital to a loan evaluation is often misplaced. California Student Aid Commission statistics show that at least half of the loans made in California will have been sold at least once by the time they mature. Within the booming trade between original lenders and secondary institutions like the federal Student Loan Marketing Assn., or Sallie Mae, mistakes can occur.
Many Loans Sold
"A student trying to submit deferments doesn't always know if the information is forwarded," says Jose Robledo, 40, director of student financial services for the Los Angeles Community College system. "If a loan's sold three times it can take half a year for paper work to catch up. By that time a student will have gone into default."
Students with rescheduled loans who move frequently may court disaster. Just ask Vicki Middleton. A Michigan sociology student who moved to California in 1979, she received three student loans between 1971 and 1980.
When she couldn't find employment after her graduation in 1981, she filed for an automatic repayment deferment. Over the next two years she changed residences repeatedly, moving around the San Fernando Valley from North Hollywood to Sherman Oaks and on to Reseda. Unfortunately, her student loan from the National Bank of Detroit also was on the move, sold first to the National Bank of Minneapolis and later to Citibank.
Two Obligations Paid Off
When she finally settled permanently in North Hollywood at the end of 1983, she found herself in default despite the fact she already had paid off two loans and correctly requested deferment of the third.
"As I followed my paper trail through the Midwest, I realized I had investigative skills," Middleton says. A stint in the collection office of Winston Tire Co. led to an assignment chasing debtors for a medical corporation. Gone forever was her interest in sociology. Middleton knew her true calling was debt collection.
"Experience gained trying to resolve my student loan computer error has made me one of the top credit collectors at Great Western Bank," Middleton, 34, says. "I trace chronic delinquents who've skipped out on their loans. I can find anybody. You should see my Rolodex."
Ironically, Middleton is still unable to resolve her own credit problems. Her tax refunds have been confiscated for the past two years, and according to the computer she still owes $2,501.
"I could pay it off, but you just can't trust these collection agencies," she says with admirable equanimity. "My husband and I have learned to live with separate bank accounts," she adds. "That's our secret to a stress-free family."
Many Billing Errors
People like Middleton who can document their efforts to resolve billing errors have nothing to fear, but those purposefully avoiding their financial obligations should prepare for judgment, says Robert Bonner, U.S. Attorney for Central California.
New authority allowing him to confiscate property, garnish wages and withhold tax refunds brought in $1.2 million in defaulted funds last year. An additional $5.6 million could be recovered if the 1,226 students presently under investigation by a special collection department ever pay up.
"We're after those deadbeats who make Uncle Sam wait while they pay off Visa," Bonner says. "Some are pretty good at hiding out, but we'll track 'em down--hopefully when they least expect it."