Student Loan Disability Discharge

[Anonymous]

Makes sense, maybe the three year monitoring period is what's causing others to experience credit dips. I don't mind waiting 3 years for my credit to return to where it should. I doubt I'll be doing anything within that timeframe that requires great credit anyways.

[Anonymous]

Hi All,

I wish that I would have known that getting my loans discharged would negatively affect my scores. I just started trying to rebuild my credit this year because I won my VA disability and my SSDI! My student loans were permanently discharged on 3/10/15.  They started reporting on some of my credit reports as closed paid as agreed, and as a positive trade line, but then 2 of them reported closed paid, was 90 days late; they showed as potentially negative items!  I called The U. S. Department of Education/Great Lakes(my loan holder)on Monday 4/6, and explained to them that I was granted a forebearance that was backdated to cover those dates in question....well after being on the phone for over an hour while he kept coming up with excuses and I kept coming back with why his excuses made no sense at all......he finally came back and said that they would correct it but I would have to send in a dispute to the credit bureau so that they can report the correct information! Lo and behold I get an alert from myFico today that there had been some changes to my reports, I check and my score has dropped 39 points!! All four of the loans are showing a $0 balance the status shows pays account as agreed, but in the description it says payment deferred account in forebearance-closed or pai account/zero balance student loan balance paid or being paid by insurance company.  I really thought that this would help my overall debt/credit ratio... this removed $139,000 of student loan debt!!

[Anonymous]

Thank you so much for bringing this up, have you been able to figure out a solution as of yet? I am in the beginning of this process and appreciate all the experience here. Can anyone else update what CR scores and fico scores are reporting after the acceptance of the TPD? thank you.

[Anonymous]

Update on my end. Credit just dropped 75 points from Equifax. Only difference between last week's info and this week's info is now my loan statuses appear as in Deferment while my discharge decision is being made. Every single article I've read states deferment will not affect your score. I tried to talk to an Indian guy at Equifax, but he implied he was unable to talk about my credit and why it lowered (not sure why, and we both had a hard time understanding each other so I didn't push it much lol). So he's sending me my Equifax credit report which will allegedly "spell out simply exactly why the decrease happened." His words, which I seriously doubt. I'd imagine I'll need a professional to take a look over it and find the reasoning.

I don't think I need to tell you how devastating a 75 point drop is -- From Excellent to Fair on the rating scale -- and this is before a single loan has even transfered over to NelNet, the discharge people. I've even still been making double the minimum payments on my loans while they're in deferment. I'm absolutely puzzled. My student loan debt is only $8,800 (of which I'll probably only save $6,000 after they tax the discharge), so this is completely not worth it to me. Maybe if I were in debt $30k or more I'd be fine with how this is turning out, because I know I could slowly repair my credit much faster than I can repay $30k. But that just isn't my case. My monthly payments were $150, and going down fast each month. I had a plan to live a simple, luxury-free life (with a parent) for 2 years until the loans were paid in full. The discharge was simply a deceptively risk-free looking service that I thought would be foolish not to accept.

What little good news I was able to finally discover is that I can write a letter to have them toss my application out if I decide against the discharge. Or if the discharge already occurs, I can also write a letter and everything magically goes back to how it was when they received the form with "no consequences" according to the DisabilityDischarge.com people. Another statement I very much doubt is true. I'd imagine it would result in more negative remarks about how I failed to keep my obligations with the discharge people, when really they failed to be honest about the credit score affects and I simply want to take on the responsibility of repayment myself; something I shouldn't be punished further for wanting to do.

I have a semi-professional telling me to stick with it and not to worry; that things will work out in the end. But I'm skeptical.  I may contact some credit professionals for $200'ish and hopefully find out what my best option is before even more damage is done. But there's no way they can help me in time before Im approved for the discharge (any day now probably), at which point more damage will be done. I just hope if I do decide to opt out of all this, the -75 score I suffered through this week will revert back to normal, or at least repair itself within a few months.

Harsh but apparently truthful bottom line I've observed: The worse you were at paying off your student loans, the better off a discharge will treat you. What an amazing system.

[Anonymous]

Wow! I hear ya!  I called My FICO again and right now they've had to push my situation up the "channels" to the actual Fair Isaacs people, because it's an ALGORITHM problem they can't help me do anything about it at "My FICO", at least the staff (98% of my interactions here were positive) were kind and truly seemed to care about my situation.

What's really frustrating is it's already affecting my services.  I used to get 0% balance transfers in the mail and not any since the score dropped from the mistake. BUT this is only from folks using "My FICO" specifically,  my credit score say, Experian is in the low 700's from "My FICO" with the "transferred" being interpreted as "derrogatory, red flagged" account.  BUT my score from Experian directly from the bureau is in the 800's!!  SO it's MY FICO messing this up. Sorry My FICO but it's true.

One of two things need to be done in my case and for ANYONE that has "transferred" on their account, especially those like me who had a positive healthy account for over 18 years!!! With out a single missed or second late payment, ALL on time.  The bank even wrote me a letter saying so is the following...

1. Fair Issacs team CHANGE the algorithms to NOT misread anything that says "transferred" as a negative, OR

2.) the entire banking system in the USA will have to come up with a word with Fair Issacs that won't be misinterpreted as a negative.  

Either way, it's a HUGE undertaking but I'm totally up for it because THOUSANDS  of students will be affected, not just those with the TPD. I also am in contact with the NCHER (National Council of Higher Education Resources, formerly The National Council of Higher Education Loan Programs, Inc.).  

I wouldn't change it back if I were you just yet because it will probably be an even bigger mess!! You are right to be skeptical about folks giving you the correct information.  I am very vigilante with my research because  it is one of my best skills as a former psychotherapist in private practice I had to work with billing and diagnosing and insurances that tried to get away with not paying me etc;.,,Let's say the scruples in this country where business is concerned is less than desirable!!

I'm one of integrity in all that I do, so I do what I mean and I mean what I say so I don't speak up unless I'm completely confident with my information and have checked and rechecked.  Any kind of deferment should NOT affect your credit score AT ALL so it's not that.  There is the IBR program for income base repayment as a federal student loan option, that's what mine was in for several years before the transfer/pay off.  

I NEVER had an issue til it was "transferred" Oct. 2014.  ALSO, I was told by NelNet that essentially they consider your loan forgiven right away and ONLY if you earn more than the standard level of poverty for two people (BUT ONLY YOUR income counted, this year its $15,000.00 a year, that you can't earn over, and that is net, I asked if you are self-employed other wise if you work for others it's the GROSS over $15,000, and next year and the following years it'll increase slightly) do they pay any attention to it.  You just have to fill out a form for the next three years during the "monitoring" period BUT for all intents and purposes NelNet considers it done., and that reporting is their only one, they don't do any other reporting after the monitoring period is over, the first one is the last they told me.  THIS is why I'm being so persistent.  I want to make sure this 'transferred" issue doesn't mess up my credit for the next 7 years argh!! 

Anyway, ALL of us need to stick together on this!! I may have to get some sort of petition going at some point so keep in touch!!

[6speed8]

Mine were discharged for disability in 2012. Should be receiving my final of the "three year monitoring forms" shortly. All my loans show "Current" and "Closed/Paid/Sold" or "Transferred/Paid/Sold".

[Anonymous]

The problem is the wording "transferred".  Did you ever check with FICO and order your score/report too and see if there is a "red flag" on the student loan account that is marked "transferred"?

This is where the problem is.  My FICO is NOT taking responsibility for THEIR alorithm misunderstanding the word "transferred" as a negative. It is NOT considered a negative by ANY bank in the USA, and NONE Of the credit bureaus consider it a negative, however, MY FICO is refusing to do anything about this dysfunctional algorithm that is affecting thousands of people.

I will take this as far and as public as I have to to make sure that this is fixed, not only for me but for all of the other students, young adults an older adults out there that had their student loans forgiven for whatever reason and may not even be aware that this is going on.

It's interesting how fast people can get access to our cell phone conversations or other things if the government thinks they are at risk, but if our rights as individuals are being violated no one cares.

I'll keep posting and responding until this gets resolved and might even consider somehow gathering other folks that this has happened to and maybe of there's a ton of us we can do something collectively.  Until then, I've got a list of folks I'm contacting and will continue to try to work with MY FICO as I am NOT satisfied with their "help" thus far. They keep telling me to go to the bank and have them change the verbiage from "transferred" to "something else".  But the banks are instructed by some regulatory entity to do this.

I'm going to speak with the folks at my current banks to see what they would do in a situation like this to see if they are allowed to change the verbiage and that the other bank that the loan was with is just being stubborn.

Again, I'll keep folks posted.

[Anonymous]

My older brother’s student loans were discharged because of his SSA disability determination. All of his student loan debt was forgiven and his credit improved greatly. My brother’s credit scores were in the high 300s and low 400s but its been almost 2 years now. His current scores are in the high 700’s currently. (The loans that are forgiven are the William D Ford Federal Direct Loan Program, Federal Family Education Loan Program, Perkins Loan, and TEACH GRANT.) I don't know if it remains on your credit history. But there is a post-discharge monitoring period of 3yrs and if you don't meet the requirements of the Total disability discharge. They can reinstate your obligation to repay discharged loans or TEACH grant. They can do this if your annual earnings exceed the poverty guideline amount, receive a new loan/TEACH grant, receive disbursement prior to discharge date and fail to return the money to the loan holder, or if the Social Security Administration considers you no longer disabled, or your medical review for your SSI OR SSDI benefits is not 5 to 7 years or more from your last date of your SSA disability determination. I hope this helped and good luck to you and everyone else applying for a discharge of their student loans.

[6speed8]

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@Anonymous wrote:

The problem is the wording "transferred".  Did you ever check with FICO and order your score/report too and see if there is a "red flag" on the student loan account that is marked "transferred"?

This is where the problem is.  My FICO is NOT taking responsibility for THEIR alorithm misunderstanding the word "transferred" as a negative. It is NOT considered a negative by ANY bank in the USA, and NONE Of the credit bureaus consider it a negative, however, MY FICO is refusing to do anything about this dysfunctional algorithm that is affecting thousands of people.

I will take this as far and as public as I have to to make sure that this is fixed, not only for me but for all of the other students, young adults an older adults out there that had their student loans forgiven for whatever reason and may not even be aware that this is going on.

It's interesting how fast people can get access to our cell phone conversations or other things if the government thinks they are at risk, but if our rights as individuals are being violated no one cares.

I'll keep posting and responding until this gets resolved and might even consider somehow gathering other folks that this has happened to and maybe of there's a ton of us we can do something collectively.  Until then, I've got a list of folks I'm contacting and will continue to try to work with MY FICO as I am NOT satisfied with their "help" thus far. They keep telling me to go to the bank and have them change the verbiage from "transferred" to "something else".  But the banks are instructed by some regulatory entity to do this.

I'm going to speak with the folks at my current banks to see what they would do in a situation like this to see if they are allowed to change the verbiage and that the other bank that the loan was with is just being stubborn.

Again, I'll keep folks posted.

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I just went back and looked at them all. They're listed multiple times. Transferred from original lenders to Dept Of Education, to NELNET, to Closed. Their not receiving last years income form by mail and reopening them threw a wrench into the machinery. The ones that were reopened until they straightened out the paperwork now show closed February 2015. It's always something lol.

[6speed8]

Got to keep an eye on these loans. Thursday and Friday, I received the "extended fraud" responses from Equifax and Experian so they're now in place. Probably going to set up the "credit freeze" as well. In carefully reading through the reports they included, I noticed that within the multiple times the same loans are listed over time from "Current" to then "Closed.Transferred" after my initial disability discharge in 2012, the loans are now relisted as "Open" or "Deferred. Payments to resume February 2025."  I called NELNET. As I stated previously, they claimed to not have received the 2014 Disability Discharge Monitoring form for 2014 so they reinstated the loans. I got all that straightened out but the loans/paperwork have not been returned to NELNET yet so they will still show "open" until that happens. She told me it generally takes a few months and they report at the end of each month, so I should keep my eyes on it. So much crap to keep track of..