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New Contributor
Posts: 67
Registered: ‎02-06-2008
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Private Student Loan - Rehabilitate?

I have a defaulted private student loan that fell into default about 5 years ago (now in collections). They wanted really high payments on a 12K loan and would only "consider" forbearance if my account was in good standing (it had been 30days late at the time).  Not being able to pay the past due amount the loan defaulted.
At the time I contacted the Department of Education to help me consolidate that loan with other federal student loans I had that were in good standing in hopes of getting a manageable monthly payment.  That never happened because D.O.E could not find any information on my private loan, they did find information on all my other federal insured loans with two separate lenders.
Can a private student loan in collections be rehab?  Is a private loan the same as a Fed loan in the sense they will garnish without suing me?
Thanks for any feedback!
My other federal guaranteed loans are in great standing and always have been.  They are the oldest postive lines on my credit report.
New Member
Posts: 1
Registered: ‎05-15-2008
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Re: Private Student Loan - Rehabilitate?

Boo Bee.. whatever you do, do not jump to consolidating those loans if they are in default.  Rehabilitate them first making 9-12 consecutive payments.  Once these payments are arranged you cannot default on them ever again because loan rehabilitation is done only ONCE as a courtesy.  Why rehabilitate instead of consolidate :
-Upon purchaSe of a loan by an eligible lender, OSFA will report rehabilitation of the loan(s) within 90 days to all credit bureaus , and OSFA will request that the default reporting by OSFA be removed from the borrower's credit history.  (this is unlike consolidation where the credit bureau information is not removed for seven years after default, even if the defaulted loan is paid in full.).  OSFA does not have the authority to remove credit bureau reporting made the ORIGINATING lender (was your loan sold to another lender for consolidation?) or any other agency or lender.  
Let me give you an idea of what happens when consolidating a loan is a bad move.  My husband owed SMAE $49K for student loans , he defaulted.  It was close to our wedding date and they started to demand payment, he told them he couldn't pay the full monthly payment.  Well -they were real nice on the phone and enticed him to consolidate his $49k in school loans and he wouldn't have to make a payment for 6 months because they "understood" his situation.  My husband grabbed on to the opportunity not knowing how devastating this would be to his credit report.
This was the result :
-his credit report now reads he had 5 SMae loans in which he defaulted (60+ days) and he is going to have a real hard time disputing because by consolidating
- HE VALIDATED the defaulted loans.  Those babies are going to stay on there for a good 7 years.  Again, I repeat the defaulted loans are now valid on all three bureaus because they were payed off through consolidation.
-credit dropped 120 points (credit to debt ratio increased to 80% - since we didn't like to open up too many credit card accounts)
-original loans had a 4.5% interest rate.  Consolidated loans now have a 7% rate
-he does not qualify for the rehabilitation because technically he is has not defaulted on his new consolidated loans.  The previous loans will remain saying "defaulted" on all three bureaus
I'm a newbie on this forum.  I don't have many theories on how to clean your credit.  All I can give you is real world exercises my husband and I have been through with student loans.  You could learn alot from a dummy.
We have recently paid off our debts and sending $1K every month to student loans (more than the minimum $200).  However, this is not enough to get into a new house and not be seen as a SUBPRIME borrower.  Don't get me wrong, we can get someone to lend us money but the percentage rates they provide to us will have us paying any house off in 50-60 years.    His student loans have basically ruined our ability to finance *anything*.  Soo, we take very good care of our car and pray it never breaks down because we'll have to use our house deposit money we are saving in order not to pay PMI's to any lender. 
Here is what my credit attorney provided to me, hope it helps you out :
>First, contact the Office of the Ombudsman at the Department of Education and let them know you are interested in rehabilitating your defaulted student loans. Use the word "rehabilitation" specifically because that refers to this specific program. Their toll-free number is 1-877-557-2575, and their website is (with no "www"). This office will provide the necessary forms for beginning this process.
New Contributor
Posts: 67
Registered: ‎02-06-2008
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Re: Private Student Loan - Rehabilitate?

I tried again making several calls to figure out what options I have on rehabilitating my defaulted student loan.  I got tossed around to the federal level and state level and all that seems to pop up on someone's computer are all my current loans in good standing.  There seems to be no record of my defaulted student loan other than a "Paid in Full" with AES my current provider.  When I called them they tell me the account is paid in full and was sold to a collection agency.  They couldn't offer me loan rehabilitation and transfered me a hundred times with no luck.
Are my difficulties with this defaulted loan because it's a private lender with no guarantor?
I almost don't even want to dare trying to deal with the CA on this one.  I'm confused even more because my Exprian report says this derog will fall off my report in 2011 (I thought there was no SOL for "private" student loans).
I'd like to fix this since it's not going away but my efforts seem to be in vain.
New Visitor
Posts: 1
Registered: ‎09-30-2013
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Re: Private Student Loan - Rehabilitate?

Did you ever figure your situation out? I am having the same exact issue! I feel backed into a corner and hopeless!

Valued Contributor
Posts: 1,653
Registered: ‎06-09-2008
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Re: Private Student Loan - Rehabilitate?

[ Edited ]

Private loans are a completly different animal from federal loans.


The reason the DoE couldn't find the OP's private loan is because they have no jurisdiction over a private loan, and you cannot consolidate a private loan into a federal consolidation loan.  Some private lenders will allow you to consolidate federal loans into a private loan, but you almost never want to do that.


Private loans do not have the same protections and benefits that federal loans have.  Private lenders are not required to offer you payment plans like IBR and PAYE, they do not have to offer rehabilitation, they don't even have to consolidate your loan unless you meet their credit standards.  


My reccomendation would be to investigate the statute of limitations in your state and the state where you took out the loan to see what laws apply to this debt and when it might be out of SoL.  Once you're out, they cannot sue and garnish you.  Until then, they can sue and seek action like garnishment.  Actions you take, like making a payment, can reset the SoL in some states/situations.


The Rebuilding Your Credit forums here will have good info for you.  In the case of default, private student loans behave much more like other unsecured debt (like a personal loan or credit card debt) than a federal student loan.


EDIT: Just saw the date on the OP properly, doubt they are still around.  You may want to start your own thread with your own details rather than continuing to post in this one since it is so out of date.

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