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Student Loan consolidation vs. Rehab program

Contributor

Student Loan consolidation vs. Rehab program

Question - I successfully completed a rehab program for four of my student loans last year. My loans have since been picked up by AES and the trade lines date back to 2006 with a positive payment history. I am now rehabbing four additional loans (I was not aware that I had 8 loans...). I have only made two payments so far.

 

My husband and I need to move. We are in a really bad school district and my son is starting kindergarten in August. We would like to go FHA because of the downpayment amount. My husband wouldn't be on the loan as we would keep our current home as a rental (I am not on that loan) and it is an FHA loan. I don't believe I can get an FHA loan because of my defaulted student loans, correct? Would consolidating them be more beneficial? Or a quick way to get on the federal government's good side?

 

Thanks!

Message 1 of 6
5 REPLIES
Established Contributor

Re: Student Loan consolidation vs. Rehab program

From everything I have heard, consolidation will not remove any of the past negative tradeline information. I think rehab is your best option. No quick way around that.

Message 2 of 6
Established Contributor

Re: Student Loan consolidation vs. Rehab program

You know, you might have better luck posting this in the Mortgage forum. I don't know that anyone here will know about FHA requirements....

 

But good luck!

Message 3 of 6
Contributor

Re: Student Loan consolidation vs. Rehab program


bahbahd wrote:

From everything I have heard, consolidation will not remove any of the past negative tradeline information. I think rehab is your best option. No quick way around that.


I think I am okay with the negatives... my score is already mid 600s with them. I am just looking to move in the next six months or so and I don't believe I can get an FHA loan with my loans reporting as defaulted... if I consolidate wouldn't that open a new tradeline and the existing defaulted loans would be closed, right?

Message 4 of 6
Contributor

Re: Student Loan consolidation vs. Rehab program


InvincibleSummer3 wrote:

You know, you might have better luck posting this in the Mortgage forum. I don't know that anyone here will know about FHA requirements....

 

But good luck!


I did that as well : )


Thanks!

Message 5 of 6
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Valued Contributor

Re: Student Loan consolidation vs. Rehab program

My understanding is that consolidating your loans does remove the default status, but I would confirm that with the banker you plan on working with for your mortgage.  Consolidation will open a new account, and that will cause a ding to your score, as well as impact your Average Age of Accounts.

 

Overall, your best move is rehab unless you there is no way you can wait the 9 months.

Message 6 of 6