Fear of contacting about my SL debt

[Axa]

2 SallieMae SL are still on my report, non-derogatory. Apparently, they were each sold to ECMC. ECMC accounts were derogatory and dropped off this month, 2/2013. Result? Credit score went UP, about 40-60 points on each report.

Truth, I don't even want to pay them at all. But, I want to go back to school and get financial aid, so I have to bring the SL into positive status... QUICKLY. The hurry is because I'm planning on changing my financial picture and right now is when I'd qualify for the most financial aid.

The obstacle I'm battling with is fear. I'm afraid that if I contact ECMC or log into the student loan website to get more info on my payment options, the loan will reappear on my reports, damage my credit, and ruin my chances for applying for credit in the next 6 months (part of my big financial plan).

Maybe I just need some encouragement. Maybe some wisdom, too, from someone who knows a way I could go about this. Or, maybe I just need to wait to go to school. I don't like this last option because the circumstances in my life are ripe for attending school and testing out of courses for a faster degree, and the specific degree could bake up at least $1M over the next 2 years. I don't want to see this as a catch-22, but I'm in the box looking out and I need some observers on the outside to add their sense to the equation.

[SCF]

First things first, you took out the loans, and you defaulted on them.  Whether you -want- to repay them or not, the right thing to do is pay what is owed.

Are these federal loans?  I'm thinking yes based on what you've said.  If so, you can consolidate them to move them out of default immediately, or you can rehabilitate them over the course of 9 months.  Rehab is the much preferred option because it removes some or all of the negative reporting, and gives you back-dated, positive tradelines for the rehab'd loans.

Have you talked to your potential school's financial aid office?  Federal loans do not require a credit check, just that you don't have other loans in default, so even if resolving this issue has a negative impact on your score, you could still be eligible for the aid you need to go to school.

As a last thing, I'd say to be careful.  You've obviously had issues repaying your debt in the past, and you now seem eager to take on student loans and possibly other forms of debt for what sounds like a "too good to be true" pay-off.  Be sure that the path you are taking is the best one for you and yours financially.

[Axa]

Yes, federal loans. And yes, I'm gonig to pay them off one way or another. It's just the timing I'm considering. There are no derogs on my report now, since I've cleared up the two little derogs and a bunch of errors after examining my report a few months ago, so the SL were the only ones until ECMC fell off this month. So now I feel I'm getting close to being the position to pursue a career move (not a "too good to be true" deal) that I've been putting off for over a year due to the lack of this specific degree qualification. The financial aid office won't consider me if I have outstanding loans.

Maybe there's something I'm missing in this whole process, so I'm just throwing my thoughts out there.

[SCF]

Since they are federal loans, I would contact ECMC and start the rehab process unless you cannot wait 9 months for the loans to be out of default.  If you can't wait, I would consolidate them to remove the default status.  Federal loans don't go away.  Although they aren't on your report now, they could come back at any time.  The collection agency can even garnish your wages without a judgment, or seize your tax returns.

It's possible that if you consolidate or start rehab now, that information is never posted back to your report, and any chance of it returning goes away when the loans are out of default.  It's also possible that the information will be back in a few weeks/months and that ECMC or a new CA will garnish your wages and seize your tax return to start the repayment process.  It's hard to say what any given CA will do with any given account.

[Axa]

Okay, all this is still intimidating to read because of the unknown factors. I'll contact them today and see what my options are.

Update: This message was sitting on my screen while I was making the calls. I called ECMC at 888-221-3282 to discuss, and I was informed that I could pay it off now and have the account always show defaulted/collections status until it drops off my credit report in 10 years, or I could make 9 payments in a 10 month period to rehabilitate and have the loans show positive payment history. Erase the baddies in 10 years or 10 months... obvious choice here, so I'm rehabbing.

Thanks, SCF, for your responses. They helped.

[Axa]

As an addendum, I wanted to share something else the ECMC rep said:

If extra payments are made, they cannot be applied to the principle only, but must be applied to both principle, penalties, and interest, due to the arrangement they have with the govt.

I'm going to investigate this further, but apparently, this is another difference between SL and other loans.

[SCF]

Glad to hear you've gone the path of rehab.  It takes longer, but is much better for your credit, and a great way to start over.  Good luck with your rehab!