I owe the dept of ed $2,500. How should I pay this to best help my FICO score?

[VegasKyle]

I have one loan that is listed as owed to "US Dept. of ED/FISL/SF" for $2500 it was opened 8/03 and EQ shows last activity on 4/05 it is listed as 120+ past due. I want to pay this off but in a way that is going to have the most positive impact on my FICO score.

Should I just call the dep of ed and pay it?

Should I ask for a PFD?

Should/can I get it in the rehab program?

What is going to be my best course of action here? 

[Anonymous]

Are currently up to date on your payments or is the account still late?  I've heard success stories with PFD when it comes to student loans.  The best way to help your score would have been to make all of your payments on time and probably take down big chunks (like $400 each month) until it was PIF.

[VegasKyle]

I'm late. There hasn't been a payment mad since 2005.

I think PFD is probably my best option.

I just wanted to know if there is someway to bring the account in good standing that would not show the period from 2005-2010 as being a KD and 120+ days late.  I don't have any open Trade Lines so I thought it would be good for my score if there was some way of keeping it around and it was positive.  

[laz98]

does the department of education do pfd agreements?

[VegasKyle]

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@laz98 wrote:
does the department of education do pfd agreements?

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I don't know.  I'm just trying to see what my options are.   

[VegasKyle]

I just got off the phone with the Dep. of Ed and they were quite helpful and knowledgeable.  They don't offer PFD. My best option with regard to my credit score is rehabilitation. It must go the whole 9-10 month term. If I pay it off early it will show as a defaulted student loan paid in full. I set up a payment plan that will end just as the rehab period is over. 

Kind of silly that I am willing and able to pay sooner but won't because of the negative impact on my credit score. 

[Jazzzy]

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@VegasKyle wrote:

I just got off the phone with the Dep. of Ed and they were quite helpful and knowledgeable.  They don't offer PFD. My best option with regard to my credit score is rehabilitation. It must go the whole 9-10 month term. If I pay it off early it will show as a defaulted student loan paid in full. I set up a payment plan that will end just as the rehab period is over. 

Kind of silly that I am willing and able to pay sooner but won't because of the negative impact on my credit score. 

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From what I've learned here, I agree that your best bet would be rehabilitation. I know that may seem senseless to you, but there are tons of people out in FICO-land who would love to have the ability to pay off a loan...any loan...and have all the bad info disappear. They would love to be given the opportunity to be "rehabilitated." School loans are the only ones that I know of that work that way.

Besides, this will help build a good repayment history for you. Some day, you will be glad to have the payments showing on your history.

Congratulations on tackling this!