Student Loan Forgiveness for Public Employees

[NYSuperdoodle]

I'm readying myself to buy a home this fall (hopefully) after my rather nasty divorce gets settled, and I'm worried about some student loans that aren't showing up on my CRA reports, but I guess they could any time. After doing a little research online, it looks like I'd qualify for the student loan forgiveness program (I work for a local government) if I'm able to consolidate my loans and start making payments after I make 120 payments. 

Question 1- will the payments be from a "default" status, or will it just be a new account on my CR while I make the payments?

Question 2- how would I go about consolidating the loans without raising any alarms and generating a negative report on my CR in the meantime? WOuld it be OK to contact the collection agency?

Question 3- would I be financable during the first 9 months of the consolidation payments or would I have to wait until next year to purchase a home?

and oh yeah Question 4- what exactly is the difference between consolidation and rehab? Are they mutually exclusive?

The amount of the loans isn't much I don't think - maybe $15k, so I'm thinking 120 payments wouldn't be too large to handle at all. I just want to make sure I don't do something stupid by being proactive and poke a bear by mistake. 

Thanks for any advice. 

[DrZoidberg]

I believe to qualify you have to use the federal loan consolidation program. You consolidate and then make the monthly payments. 

Here is some more info for you: Loan Consolidation

[SCF]

1) Consolidating the loan will bring it out of default status.  I do not believe that loans in default are eligible for Public Service Loan Forgiveness.

2) There's no gaurentee that the current CA, or a new one, won't report this information tomorrow.  I would contact the CA and say you'd like to consolidate the loan to get the process started - I doubt they would go to the trouble of reporting a loan that they'll be moving off their books shortly - but again, I'm not sure there's any way to gaurentee no negative reporting.

3) That depends on what is on your credit report.  When you consolidate, the default status is removed as soon as the consolidation loan closes, and CAIVRS should be cleared soon after - so those things won't stand in your way.

4) They both get your loan out of default, but consolidation is immediate and rehab takes 9 months.  Rehab cleans up your credit report by removing any default comments from tradelines related to your loans, and the CA reporting.  Rehab also gives you a new tradeline back-dated to the start of the original loan, which can be a great boon to your AAoA.

[Rikku]

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@SCF wrote:

1) Consolidating the loan will bring it out of default status.  I do not believe that loans in default are eligible for Public Service Loan Forgiveness.

2) There's no gaurentee that the current CA, or a new one, won't report this information tomorrow.  I would contact the CA and say you'd like to consolidate the loan to get the process started - I doubt they would go to the trouble of reporting a loan that they'll be moving off their books shortly - but again, I'm not sure there's any way to gaurentee no negative reporting.

3) That depends on what is on your credit report.  When you consolidate, the default status is removed as soon as the consolidation loan closes, and CAIVRS should be cleared soon after - so those things won't stand in your way.

4) They both get your loan out of default, but consolidation is immediate and rehab takes 9 months.  Rehab cleans up your credit report by removing any default comments from tradelines related to your loans, and the CA reporting.  Rehab also gives you a new tradeline back-dated to the start of the original loan, which can be a great boon to your AAoA.

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All of this is correct (to my knowledge), but I'd like to add that the OP needs to be careful about consolidating if he/she intends to apply for Public Service Loan Forgiveness. Only certain types of federal loans are eligible, so if you inadvertently consolidate one that is not, you'll be SOL when you apply for forgiveness. The best thing to do is to let your lender know that you want to apply for Public Service Forgiveness, so they can advise you on which of your loans will be eligible and which will not. If they all are, go ahead and consolidate. Or rehab and then consolidate, depending on which option works better for you. You'll also want to choose the longest repayment plan you can get  to maximize the amount that will be forgiven after ten years. Of course, you'll have to be careful not to miss any payments or you'll reset the clock - and if you change to a private sector job, you won't qualify. You'll need your employer to certify your employment when you apply for forgiveness - which won't be a problem if you're working for the same agency in ten years, but if you switch between various different public jobs in that time, you'll need to track down previous employers to certify and make sure there aren't any gaps in your employment.