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Collections Law/Tuition debt settlement


QUESTION: I have a tuition debt (1.5 years old) I am trying to settle (NOT a loan). The original unpaid amount was ~$7000. At the end of that semester, I became disabled and remained essentially incapacitated until Oct 2013. I immediately started trying to deal with the massive amount of unpaid accounts that piled up (medical, utilities, credit cards...) but it was overwhelming and by the time I contact the school in December it had just been sent to collections. The agency is commission, so the school owns the debt, and I paid a total of $1000 directly to the school hoping they would work with me. Neither the school or the collection agency cared at all about my disability, which I can't believe is not considered a mitigating circumstance, even though I have plenty of documentation.
The agency said the school would settle for the $7000 (they didn't have a record of my $1000 payment yet)plus $800 of their fee, but that it was entirely up to the school. The school said they would settle for the $6000 balance of the original tuition amount, but that the agency required 21% off the top, which they said is "by law". The agency said the school gives them an amount and they have to abide by whatever it is. I don't believe either one of them, but I don't know. The school already dropped about $3500 in interest and late fees so obviously they can negotiate to some degree. But- the school recently offered a 'pay for delete', which I was very surprised at and was ready to take (for $7600). I asked them to email me the details so we could be clear, and they sent me a pretty vague message, and 30 minutes later another email just stating the previous email had been "recalled". The lady at the school seemed to know what she was talking about and said they had removed accounts from collections before. Now it seems they are trying to get around actually doing it.
I can't get a straight answer on whether tuition can be discharged, and I can't find any of the state laws they keep referring to when they both say they can't negotiate. Further, if this is all set in stone like they'd have me believe, why do I keep getting different amounts, answers and offers. I don't want to file BK anyway, and it seems like I will have to end up paying so I want to pay the $7600 now instead of $12000+ they said I owed. I have saved up enough to pay this (a big deal for me), but I don't want to wipe out everything I have to get it marked "paid". I know that paid collection is almost no better than unpaid for credit rating.
My questions are- to what extent is this actually dictated by some state law? Do I have a right to a copy of the contract between the school and agency (to see if it's true the agency cannot accept less than 21%)? And if I get a tax refund in the next month, will they seize it? I don't know how quickly they will take drastic steps like that, which is also why I want in writing whatever agreement we have. I know they both want as much money as possible, but how can I get the facts and at least make them stop lying to me about what they can and cannot do? If there is ANY way I can get it removed from my credit, I have to figure out how to negotiate it with as little money as possible.
Thanks so much!

ANSWER: I am so sorry it took so long to answer this question but, it has taken a good bit of research. A lot of this will depend on whether or not this is a state or federally funded school. I will also need to know what type contract you bound by to repay this tuition debt.  If the contract you signed states collection fees can be added, then they can be.

Starting today, keep a collection diary on this debt. Keep a record of everyone with whom you speak, the date and the time and the subject of the call. Be sure to get person's name.  Keep a copy of all correspondence sent to and from you.

Send a certified letter to the collection agency requesting validation of the debt and copy the school.  After you receive this documentation, send a follow up letter to both offering to settle the debt under the condition that the information be removed from your credit history.  In this letter be sure to explain the details causing this delinquency. Please be aware that they are not under any obligation to accept your offer.  Try to get all information concerning the settlement in writing and documented carefully.

I certainly wish you the best with this situation.

---------- FOLLOW-UP ----------

QUESTION: Thank you so much for your reply, I know my question is complicated. It is a state university, and I'm sure they are legally allowed to add fees and interest. The school already offered to waive these, if paid in full. It's just hard for me to believe there is a law saying they cannot take less than the full original debt, and 21% for the agency. Also, the 21% is off the top (the remaining 79% has to equal the balance due), so it is almost 27% really, and they only had the account for literally 2 weeks before I contacted them. I know there are laws, policies,etc. but would they really rather have nothing than 90% of the debt?
I don't know what to do and I want to find out the truth, but I searched everywhere for the law that covers this and found nothing. Do you know what the statute of limitations is for this in Colorado?
Thanks again, I really appreciate your help.

The statue of limitations in Colorado is 6 years.  That is, of course, unless a law suit if filed and a judgement is issued.

You may find this web site interesting, it contains a great deal of information concerning fees, etc on debts:

It is not the easiest reading material you are likely to get this weekend but, you might find it helpful.

The fact that everyone one is the stead fast in the fact that the amount of the debt can not be negotiated for less that 90% is somewhat confusing. I have heard of creditors taking 50% or less, especially when illness is involved.  I think, and this is just my opinion, that you have yet to get in touch with the proper decision maker.  As I said in my first response, keep good records and maybe you will run across the right person with the right amount of common sense to help you.

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Ray A Miller


I am qualified to answer questions on the following subjects: FDCPA, FCRA and HIPAA as well as medical collections, general collections and collection agency related issues. I trained these subjects at a nationwide collection agency and customer service call center and audited around 150 representatives for compliance to the laws. I have been in the Collections Industry for over 30 years. I feel that everyone deserves to be treated fairly and with compassion and that is the way I trained collectors. Even though I worked for a Collection Agency, I get great satisfaction in helping those who have been mistreated or in need of help with these confusing issues.


I was the Compliance Administrator with a nationwide collection agency and customer service call center-I have trained hundreds of collectors on the above referenced topics. I have been in the medical collections industry for over twenty years and research these topics on a daily basis.

ACA International

Some college ACA Certified Collection Specialist

Past/Present Clients
I am retired due to medical conditions and spend a good deal of time keeping current on collection issues.

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