OK, I have an interesting ... *situation*.
In January of 2012, I applied for a deferment of my Dept. of Ed. subsidized loan, but forgot to mail in the signature sheet.
In the meantime, I ignored the messages coming in my inbox, thinking they were just the usual statements, telling me that I didn't owe anything for that month (since I was thinking it was in deferment). While this was happening, the Dept. of Ed. was happily reporting me as 30, 60, 90, 120 days late...
Until last October, when they passed my student loan off to Pioneer Credit Recovery, which totally threw me for a loop (because of course, I thought I was in deferment).
Life got in the way, I intended to get Pioneer to validate the debt, but I got destracted by a thousand other things...
(Fortunately?), I've at least managed to NEVER talk to them... and it hasn't appeared on my credity report under Pioneer, either. They have been miraculously silent with my credit report.
Just now I've received a letter from the Dept. of Education explaining to me that they want to garnish my wages to collect on this debt (which isn't theirs anymore?). I called the number on the letter from the Dept. of Ed. to see if the debt was passed back; all I got was a recording that they don't have any business with the debt, and I should call Pioneer.
I'd love to be able to write a letter asking Pioneer to validate the debt, and if it comes back as valid, offer a pay for delete... But I am not in a financial position to even pay them $100, and I'm afraid to contact them and get roped into making some kind of payment arrangement in order to keep them OFF my credit report.
I am expecting a considerably large commission check within the next 3-4 months that can save the day (and buy me a house)... but in the meantime, I am about as broke as they get.
I don't want to jeapardize a chance to buy a house in a few months, but I need to keep Pioneer quiet for the next 3-4 months.
What should I do?
I would contact Pioneer and get started on rehab. They probably aren't going to do a pay for delete, because federal loans have no SoL, can basically stay on your report forever (until you pay them), and they have all kinds of tools to recover them like garnishing wages, seizing tax returns, even attaching social security payments.
Rehab takes 9 months of payments, then some time for the loan to get picked up by a new servicer and for the collection tradeline to be removed and default notations to come off, but it provides the biggest improvement to your credit.
With a federal loan in default, you're going to run into a roadblock with government home loans (like USDA, FHA, VA, etc.) and you're going to have a hard time with privately backed mortgages as well. So even without Pioneer on your report (and I would imagine that's coming soon whether you do anything or not), you still want to deal with that default before you go to get a home loan.
I didn't even think that because of the default, I wouldn't qualify anyways- even with a good score and a better income.
I guess I have to take the chance with them...
I will say that for me Pioneer has been very easy to work with. They have been friendly courteous and understanding. They worked with me to get a payment that I could afford. I have made my 9th rehad payment and they are now preparing to take my loans out of default. The agreement letter states "Once your loans have been rehabilitated and is no longer in default, the national credit bureaus will be notified to delete the derogatory credit rating previously reported by the guarantor in reference to the loans. Further your prior lender that reported the default of the loans approved for rehabilitation will be notified and will be requested to remove the record of default from your credit history".
I am cautiously optomistic that this will improve my credit score quite noticeably.