I have a similar situation on my credit report. Long story short, disputing it made the situation worse. I sent a "goodwill" delete letter a few weeks ago but haven't seen any results from that. If I don't get a response from the goodwill letter, I'm going to try disputing it again. I can let you know the outcome. Oddly, this account is only reported to Equifax and Experian. My Transunion score has always been at least 20 points higher-- so I believe it does have an impact on my credit score. I've included more details about my situation below if you're curious.
Details:
I received a Pell Grant for Spring semester a few years ago. I reduced the amount of classes I was taking which resulted in an overpayment. I found out about the overpayment when registering for Fall classes and paid it off in full. I didn't think about it again until I went to buy a house a few years later. There was an account from the U.S. Dept of Education reporting as closed but with a balance. I mistakenly thought it was one of my student loans-- they had both been transferred to Navient-- and that they had failed to update the account when it was transferred.
I called the U.S. Dept of Education and tried talking to them but was told there was nothing they could do except provide a letter that there was no balance on the account. Super helpful, right?
I then proceeded to dispute the account with the credit agencies (still thinking this was a transferred student loan). I don't recall the reason I selected for dispute but it came back as "updated." They updated it to "collection" and 120 days late. Gee, thanks guys. I called the Dept of Education again and finallly figured out this was a Pell Grant Overpayment. Many more phone calls, arguing with supervisors, etc and the best result I could get was "paid collection" with the 120 day late notation. This was good enough for me to get a mortgage with a decent rate so I dropped it and moved on with my life. This was almost 2 years ago.
Flash forward to last month, and the morons have "updated" my status from 120 days late to "failure to pay." My EQ and EX scores both dropped almost 30 points. The notes sections still says "paid collection." It's been almost 4 years since the initial overpayment but that change in status obviously hurt my scores. This is the only negative item on my credit reports.
My Overpayment account is with Direct Loan Servicing (aka U.S. Department of Education) with a Texas address listed in the details. I understand that they are no longer a provider of student loans/financial aid and that they're technically "closed" although they seem to still manage some accounts. I wonder if these sudden changes in reporting are a last grab before they really close the doors.
I will let you know if I have any success with either the Goodwill letter of disputing (again) through the credit agencies.
