Why not just let loan go into default?

[PibbZero]

Sigh... 

Figured out what was the issue regarding a Perkins Loan that was reported as being 60 days late on my credit report.  I called "Campus Partners" (the ones reporting on my credit report) and explained them my situation - I accept full responsibility, but I thought Perkins Loan was included when I consolidated and that I never received any letter/phone call regarding this account, so never knew I was behind in payment.  Of course, they said there's not much they can do once it's reported.  

Anyway, paid the back payments that I owed and now I'm in "good standing" again... but then got to thinking.  What would the disadvantage have been had I let this loan just go into default and then rehab it?  From the posts I've read of people who rehabed on their defaulted loans, once the rehab is done, ALL negative reports are removed from the credit report.  The obvious disadvantage would be that I'd have to have "bad" credit score until I'm done with the rehab, but at least with that option, I'd be good again after the rehab.  But now that I'm in good standing again, I have to have this negative report on my credit score for the next 7 years.... 

Am I missing something here?

Thanks.

[tburns]

For what it's worth I think your better off keeping in good standing.

To go into default you need to stop making payments for 4-6 months. Your score will drop like a rock in that time. Then once it's in default you have wait for a CA to pick it up and work out a rehab agreement where you pay quite a bit on the SL that wont really count towards your principle once your rehabbed in 9-12 months. Your interest will be compounded and once your out of rehab and get someone to pick it up you will owe more then you do now. All rehab payments don't really make a dent in that.

So your talking about 2~ years of terrible credit, possible having any CC's you currently have closed by the issuers just to avoid a 60 day late which wont matter too much in 2 years anyways if you just kept up the payments.

If it were me, I'd just keep writting GW letters to Campus Partners till they get sick of getting them and remove it, while staying in good standing. Even if they don't the one late will count less and less with age.

[Anonymous]

The way it works is that they will take the loan out of default and make it current after 9 months of pay, but not the negative late/non payments before it was in default. DO NOT DEFAULT! Pay it, and just send a bunch of goodwill letters.

[webhopper]

Dont default... it only gets worse if you default...

After default they can sue, after they sue they can garnish...  don't start ignoring this debt cause it can come out and bite you in the A**

[GST2008]

I'm not sure what your present situation is, but if you plan on apply to grad school later on, it may be difficult to get another loan if your current ones are in default.  Also, depending on what your career path is, alot of places now soft pull your CR as part of the standard application process.  State and government agencies also have standard questions regarding if your federal loans are in default and exclude you from consideration for a job based on this.  My CR was checked to do a residency at a VA hospital and also to become eligible on the civil service list in NY.

[trulygifted01]

Believe me you dont want your loan to go into default.  By having your loan in default you are at risk for having your wages garnished and your tax refund taken. It happened to me last year, my loan went into default and my taxes were taken last year.Since then I have joined a loan rehab program in which you have to complete in 9 months and they say its safe for you to file your taxes after that but thats not true. It's a process that you have to go through before you file your taxes, my loan was completed on the 15th of april and my name is still flagged for FMS to take my taxes....The US Dept of Edu did remove my name from the tax list but it still takes 4-6 weeks for FMS to update and I am waiting now.....The wait is what hurts the most when you really need your tax money with that being said I think its best if you didnt allow your loan to go into default.