IBR and credit reports...

[Anonymous]

After a very lengthy illness (6+ years), most of which I was unable to work, my deferred and then defaulted student loans ($60,000) have fallen off of my credit report.  I'd like to start making payments again, but I don't really want such a large amount of debt to suddenly re-appear and cause my score to drop dramatically.  I offered to start making payments on the two earliest loans so that only those balances ($8,000 + $3,300) showed up on my report, then they could add the others gradually as my income increased or the first ones were paid off.  Apparently that wasn't good enough, they'd rather get nothing.  

I hope to be able to work full-time again within the next two years, and I was making over $100,000 yearly when I got ill, so a larger payment then wouldn't be a problem.    Right now a few medical bills are the only bad debt on my credit report, and the collection agencies for those seem to be willing to negotiate reasonable settlements.  I suppose I could look into IBR, but what shows on your credit report with that?  Maybe I should just sit back and not worry about it until my income is back to normal.     

Any ideas about what I should do?

[hodap2001]

In regards to your credit - I am not sure how it will look like, maybe another contributer can post a response.

In regards to your Student Loans, your first priority is to get them out of default and begin repaying them. Are your Federal Student loan consolidated or are there multiple student loans? I imagine there are multiple as your only requesting to may payment on two of your loans. Your first priority to to consolidate all of your defaulted student loans with William D. Ford Federal Direct Loan. By consolidating your loans will enable you to make one monthly payment for your loans over a 30 year period (extended repayment). You can also qualify for additional Deferments or Forbearance if (God Forbid) you run into illness again. You can also apply for IBR - again IBR is based upon your yearly reported income taxes which will establish your monthly repayment. If your income goes up, your monthly payment goes up. If you no longer meet IBR requirements (i.e. making $100,000.00) a year - you will be booted from the program and you will be required to establish standard monthly repayments. For more information, please visit www.finaid.org.

Good luck to you.

[sapling]

The above is not entirely correct.

Short version:

If your income increases to where you no longer have a "partial financial hardship", you will NOT be kicked out of IBR. Your payments will be capped at the "10-year standard payment" amount. You are still in the program, so if your income decreases again, your payments will adjust accordingly.

From IBRinfo.org:

What happens when my income increases while I am in IBR?

Because your IBR payment amount is a percentage of your income, your payments will rise as your income increases. Your lender should reassess this annually, and you should check with them to see if you need to fill out additional paperwork.

If your income increases to the point where you no longer have a partial financial hardship, any unpaid interest that has accumulated would be capitalized (added to your total loan balance). You can still stay in IBR, and your payments will be capped at the 10-year standard monthly payment on the balance you owed when you first entered repayment on the loan. You will never be "kicked out" of IBR based on your income.

[JGWantsAHouse]

I'm in IBR and it just shows the total balance of the loan and the amount of payment you were approved for in IBR. It reports very similar to any other student loan on my credit.  The only difference is that lenders won't use the reported payment when calculating my DTI.  I guess they are using my balance/360 payments???  Anyway my income has increased drastically this year so its going to be interesting to see how my payment increases once I recertify.  Hope this helps.