I am also in the same situation. I'm really hoping someone can help us figure this out. I am admittedly clueless when it comes to all of this, but I'm wondering if this is "normal" for the weird gray area we are in right now.
A little more about my situation, if it is relevant or anyone is interested: I didn't have much help or guidance when applying for financial aid/student loans out of high school. I was under the impression that I didn't qualify for financial aid at all, thus prompting me to take out a student loan through Sallie Mae (Navient), which I have been in good standing with for nearly 5 years. After checking my credit score in more recent years, it turns out I did qualify for a very small amount of financial aid and did actually receive it, and it was showing as defaulted in my "closed accounts" section on my credit report. Surprisingly, I still had a pretty good credit score of 721, but obviously seeing the word DEFAULT on my report was disconcerting and I wanted to take care of it, so I contacted the collections agency and started my loan rehabilitation program.
So here I am now. I have made 4 out of the 9 payments of $25 to the U.S. Dept. of Education. I have checked my credit score religiously for the past year or so using my Creditwise app and nothing of significance had happened. I've increased credit lines to bump up my score up even more, I've leased a car and those payments have also helped my credit score, etc. Everything was going great. That is until I checked my score this morning. My score dropped 120 points!
I had no new accounts opened, no missed or late payments, no new inquiries. Nothing. I then checked my "closed" accounts section again to find that my FEDLOAN is now shown as "120 days late" at $0 and now there is a US DEPT ED showing as "collection/chargeoff" with the balance that I am paying off through the rehab program. Again, I am clueless as to how this all works, and I could somewhat understand that if the account was "re-opened (?)" that balance would show again and count against me, but is this right? I am confused as to how having something in default seemingly did no damage to my credit, but now that I am making the effort to pay it off, I am in a worse situation.
I have a million questions, but basically, is this normal? Is this just a weird limbo period we are in until the 9 payments are made? Should my credit report show both the 120 day late/defaulted loan and now the full balance as two separate accounts? Will my credit score return to normal after these remaining 5 payments are made? I'm just so confused as to why working to pay off this debt is actually hurting me instead of helping me. I know this isn't right, but with the way this is playing out, it seems to me that just ignoring that unpaid, defaulted debt was the better option. Why is it that making these payments is doing more harm than good? It seems a little unfair and a little backwards to me and I'm just hoping someone has an explanation for us. I have been working hard to get my credit score to where it is and have been looking to purchase a home soon, and this drop in my credit will make it IMPOSSIBLE to do that. This is extremely discouraging and terrifying.
If anyone has been in this situation or can help us better understand what is going on, PLEASE let us know! Thank you!
