I have 27 student loan accounts that are in default since May 2013. Some are with Sallie Mae some are with Dept of Ed and some are Perkins Loans with my school. I owe a total of 88K I have been contacted by Windham Professionals and they said that I can consolidate all my loans through the Dept of Education and have one loan and one payment. He also said that my payments would be based on income and that I can defer my payments after this consolidation if I wanted to go back to school for my Masters. My credit is really bad right now (485) and I would like to see it good again and someday buy a house. What is my best option? They also mentioned a rehab program for 9 mnths but that's not someting I can afford. The payments are too high. Please help. I feel helpless.
Consolidation is one option to get out of default. The person you spoke with is correct in that after that, you would be eligible for income-based payment options and/or new loans. The drawback is that the loan history stays on your report for seven years. This is a serious delinquency, so this could make it harder to raise your credit score.
That said, you might consider rehab. There is no minimum payment, although not every collection agent is particularly forthcoming with that info. Read here:
The best part of rehab is that you make 9 months of payments and then your credit report is updated with the default removed and "good" history added from the date of default forward. Which is huge if, like me, you started out with sub-500 credit scores. I would make another attempt at discussing rehab with Windham, and explain that you need a reasonable and affordable rehab payment. They may want information about your income & expenses to back that up, but it's worth it to do so.
I called the Dept of Education who has 70K of the loans. 17K is from the perkins loan. It looks like I am not in default with them. For some strange reason the perkins loans defaulted but the dept of education loans did not. I might have request forebearance or something along that way. I didn't realize the perkins loans were not included. When I went to studentloan.gov the only loans that are in default status are the Perkins Loans which are now with Windham Professionals. With that said, what should I do? Should I request a rehab plan? What would my payment be like for 17k? Are they flexible? The Dept of Ed advise me not to consolidate all my loans if I plan to go back to school. Windham kind of made it seem like that was my only option. But now that I know that all my loans are current except 17K then I feel like the best route would be to rehab. But what exactly does that mean? Can I go back to school in the meantime or do I have to wait till the rehab is done? I will not be seeking anymore loans because my job pays for tuition costs.
Rehab is a process to bring your loans back current and remove the default status. You make 9 "reasonable and affordable" payments to the collection agency (Windham in your case), and then the loans are sold back to a new servicer and you continue to pay your loans as though you never defaulted. You can then choose payment plans like IBR, are eligible for new federal loans, and will have a positive, back-dated tradeline on your report. Your previous lenders must all remove all default notations, and some will even remove all of the lates.
Press Windham for a "reasonable and affordable" payment plan, and offer to fill out a worksheet of your income and expenses to prove the payment you suggest is appropriate. Rehab is the best way to clean up your report and improve your score. Consolidation is also an option, and gets you out of default quickly, but it leaves all of the negative reporting behind.
Now would be a good time to check with the servicer for your other loans. Be sure that they have your contact information and you understand what payments you need to make and are able to apply for forbearance/deferment/a payment plan as needed.
As far as going back to school, I don't think you can get more federal loans when you are in default, but I'm not sure if that restriction is lifted once you are partway through rehab. You can ask your school's financial aid office.
If this helps at all - I had a defaulted Perkins loan serviced by Windham, and they did the full-court press for consolidation too. They seemed genuinely taken aback when I said I wanted to rehab, and even went so far as to send me consolidation paperwork when I was two months in. Thank heavens I read it carefully, I almost just signed & sent back thinking it had to do with the rehab.
I remember that setting up the rehab was not as easy as my other loans, only because with a Perkins loan the school is the lender. The amount that we agreed upon as a payment had to also be approved by the school. That back & forth communication sometimes took longer. But hang in there, it's worth it.