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Regular Contributor
Posts: 118
Registered: ‎01-04-2012

Massive confusion about student loan rehab outcome.

[ Edited ]

Hello all,


I wanted to post my story here to see anyone can find any recourse for the issues I'm having post student loan rehabilitation...


I originally had 2 consolidated student loans that were being serviced by servicer A. Date opened is 2005. At some point like many people I stopped paying for these loans and foolishly allowed them to go into default. By going into default servicer A was able to file a claim, transfer and or sell ( I haven't figured which one exactly which may be why things are going the way they are ) with guarantor B. At this point my TLs with servicer A are reporting default with multiple lates and I have new TLs date opened 2009 from guarantor B also showing defaults and lates. 


So last year I finally take responsibility for my credit situation and begin to contact all my creditors. I contact servicer A about my loans and they direct me to guarantor B. Guarantor B offers me rehabilitation and I gladly accept. I was given the impression that I make these on time payments and my slate would be clean. I was told that after completing rehabilitation that servicer C would swoop in take over my loans and save the day by removing all lates/defaults/etc.


I couldn't have been more mistaken. What actually happened was that after completing rehabilitation guarantor B happily removed their TLs which were all showing defaults BUT were also showing my monthly payment and reporting as current. I contacted Servicer A via phone and CRA disputes about updating/removing their TLs. That's where things go wrong. They explained to me that because the loans went into default with them and were transferred/sold/claiming by guarantor B that they wouldn't be updating any info on their TLs. They say to me that what they show is "accurate" information as it pertains to the accounts while they were servicing them. They say they will change nothing. Not even the default status!!!! At this point I'm very upset because in my eyes these are the same loans and now that guarantor B has removed their TLs there is abolutely no record of my rehabilitation.


At this point I contact servicer C in search of some positive information. I asked them how the loans will be reported...if they will be new accounts or accurately report the date they were opened. In this case 2005. They explain to me that they have purchased these loans from guarantor B and that because of this they are "new" loans and will be reported as so. Meaning 2 new 2012 accounts and a freefalling AAoA.


I contacted the DOE ombudsman. According to them all of what's happened to me is totally valid. They say that the only policy that requires anyone to do anything is that guarantor B was required to remove the default status from THEIR TLs. Servicer A and C were not required by Federal regulation to do anything other than what they have already done. Which is nothing but kill my credit.


So I ask you all myFico friends. Am I missing something here? Is someone mistaken at any point along this story? I've combed over this so many times. Has anyone had similar issues? I've been in contact with the VP of servicer A. I call him once a week asking for review after review. He continues to say that nothing requires him to do anything. Not even remove their default status. I'd think at the very least this would be part of the rehab correct??


Any help out be appreciated! Also when I started coming to myFico my scores were


TU: 540

EX: 535

EQ: 560




TU: 680

EX: 684

EQ: 650


Thanks to all that all of you do!! So much helpful info here its amazing. I was recently approved for a BMW lease and am also expecting my Chase Freedom card in the mail any day now!

New Member
Posts: 1
Registered: ‎02-16-2012

Re: Massive confusion about student loan rehab outcome.

I would also love to hear any answers on this subject because Omskillet's story is almost exactly the same as mine. I have also tried to dispute with servicer A and they insist their reporting is accurate. It just seems to unfair to be getting double dinged for the exact same student loans.

New Visitor
Posts: 2
Registered: ‎04-29-2012

Re: Massive confusion about student loan rehab outcome.

I have 1 more payment on my rehab, I would love to know if you have any luck.  Who was the original lender, the servicer and the new lender?  My original lender was Wells Fargo and I have read that someone had Good Will luck with them removing the original tradelines.

Valued Contributor
Posts: 2,998
Registered: ‎08-13-2009

Re: Massive confusion about student loan rehab outcome.

omskillet - I am not defending A, B, or C's stance.   


But I do agree that A does not have to remove the lates.   They are reporting accurately.


B could have left the tradelines on there.   You can call them and ask them to report the TL with a positive history.  (I'd be careful with that one though.   I'd hate to see any negatives come back from B.)


C is reporting it as a new loan, all good.   Although it hurts the AAofA right now, in the long run, its going to be a better help for your score and linger long after the old TL drops off.


I think - and I could be  wrong - that if the A still had the loan when you rehabbed it, THEY would have cleared away the negatives when they sold the loan after rehab.  That is what happens for a lot of people - that their original lender still has it when they rehab.  B should have explained that to you.   

New Visitor
Posts: 1
Registered: ‎09-26-2012

Re: Massive confusion about student loan rehab outcome.

Amazing recount - as this is EXACTLY the situation I am facing.  I was told that all negative credit entries would be removed as a result of complation of rehabilitation, and if you check out their website at the DOE explaining rehab, it states the following: 


Once your loan is rehabilitated, you may regain eligibility for benefits that were available on your loan before you defaulted. Those benefits may include deferment, forbearance, a choice of repayment plans, loan forgiveness, and eligibility for additional federal student aid.

Other benefits of loan rehabilitation include the removal of

  • the default status on your defaulted loan,
  • the default status reported to the national credit bureaus,
  • wage garnishment, and
  • any withholding of your income tax refund made by the Internal Revenue Service (IRS).

After rehabilitation, your monthly payment may be more than the amount you paid while you were rehabilitating your loan. Collection costs may be added to your principal balance, increasing the total amount you owe. Delinquencies (late payments) reported before the loan defaulted will not be removed from your credit report.


I get the fact that the late payments will always show from the original service provider, however overall loan status from Servicer A continues to show 'Default' and turned over to Attorney as opposed to 'Paid As Agreed' and 'Closed'.  Maybe I'm chasing something that is not worth the overall benefit, but if the status was amended from Default - even though the late payments still showed - wouldn't that have some benefit?

Established Contributor
Posts: 731
Registered: ‎08-12-2011

Re: Massive confusion about student loan rehab outcome.

From what I understand the Payment Status of your original loan accounts should be updated to Paid/Closed and the Default removed. The Default status does ding you. Like you have copied from their site, the policy is that lates are not removed. Many people who were doing the rehab process in years past were lucky to have all original loan accounts removed. This seems to not be the case any longer.

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