In Rehab to Paid in Full

[Anonymous]

Long time lurker here. 

I'm a couple months into rehabilitating my two student loans. I will make my 3rd payment next week. I would like to consolidate them to remove the default status as soon as possible since my husband and I are trying to get a mortgage.  Our mortgage advisor basically stated that as long as the student loans show as defaulted, we can't get a mortgage. Would consolidation help remove the default, and would it hurt or help my credit scores? Also, does anyone know how long it takes to reflect as current? 

[westcoastpeach1965]

I wonder if you can qualify for a loan above the actual mortgage and wrap the student loans into the mortgage.  Not sure if that is possible, but I was able to do that with a tax lien years ago.  Maybe ask your broker about it.

[Anonymous]

When you complete rehab, essentially, your loans will be "consolidated". What's going to happen is a new servicer/lender will BUY your remaining balance on your loans & you will make payments to them on that one full loan as a whole. . . . .The beauty of rehab is that you will get your default flag removed from the CAVAIRS (sp?) system as well as your credit reports. The even better opportunity with this is to hopefully be able to get the negative tradelines removed or all of the lates backdated as positive (OK). . . . . Stick with the rehab program & whatever you do, do not miss a payment. This is one of the best opportunities you can do regarding your credit. 

I myself, completed rehab last month & my loans were picked up within 15 days. I have disputed the old tradelines and are nevously but yet excitedly awaiting the results on if they will be removed. If they will be, I look forward to seeing my scores improve. I contacted my new servicer (Great Lakes) and  the DEPT OF EDU & it has been confirmed in writing that I am no longer in default on my student loans!!! Also, they have been "consolidated" (i guess is what you can call it) into one loan with Great Lakes. 

[Anonymous]

I would prefer staying the course with the rehab. The payments are very affordable,  and I will nearly have the loans paid off by the time I complete the rehab. 

I suppose what I'm really wanting to accomplish is a way to get them out of default faster. I don't think the late payments or trade line being brought current affect my situation due to the fact that I had never made payments on my loans before they defaulted, since back at that time (2008/2009) I couldn't find a job. I've had wage garnishments for years, which have slowly been chipping away at the balance, and my taxes offset each year, paying down larger chunks. This year, when $3000+ of my tax return was offset to pay my student loans I decided to finally figure out who had my loans and do something about it.

Which brings me back to asking if consolidation would be a good option for me to bring them current?

[Anonymous]

Honestly, it really kinda comes down to if you are going the FHA, VA route for the mortgage. 

With the government back loans, you will NEED your student loans to NOT be in default - meaning that you will need to wait the course of the 9 months PLUS the time it takes for a new servicer to buy out (pick up) the loan. . . . Mine only took 15 days to be picked up, I've heard some people on here wait 2 months. Rehab is truly only complete until a new servicer picks up the loan. 

If you are NOT going the FHA route for the mortgage - meaning using a traditional/convential bank mortgage & need/want to purchase a home sooner than the 9 month+ time frame is up, then you should be okay with consolidation - however even if you pay it off sooner than the 9 months, or consolidate sooner than the 9 months is over with, the student loans will STILL be in default. 

In my honest opinion, it will be so much more beneficial to not consolidate. 

[SCF]

Consolidating your defaulted loans also cures the default, removes the loan from CAIVRs, gives you access to all the standard repayment plans, etc.  It is faster than rehab, but you can wind up rolling higher collection costs into the new loan, and there are no additional benefits to your credit report (like removing the negative statuses on old tradelines, and backdating the new tradeline).

If time is of the essence more so than the eventual boost to your credit and lower costs, then go ahead and consolidate.  In general though, rehab is worth the wait.

[Anonymous]

Due to getting our tax returns offset, my student loans are now paid in full. We amended 2013 and 2014 returns earlier this year to add my two kids as dependents. Once the offsets were applied to the balance of the student loans, in addition to my weekly wage garnishment and my monthly voluntary rehabilitation payment, the balance is now slightly overpaid! 

[Anonymous]

Good luck on your home buying journey! I just wonder since the rehabilitation process was never completed if the default status will still remain on your report until the statute of limitation expires? Either way I guess it really doesn't matter since the balance is now zero.

[Anonymous]

Thank you! I'll be back to update the status once I find out how it reports on my credit report. I'm very curious to see what happens. 

[Jesedmotherof5]

I made my 9th payment for rehab last month in the 20th and still have not heard if it has been picked up. Do I call ED or the collection agency that holds it... I thought I could dispute it in my CR because it does not say as paying as agreed and it came back verified as correct. Even move to collections area in my TU its my last babbie1 from a very difficult part if my life.... Im so anxious to see it go away and at least say paid as agreed if not removed forever...