topic Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report? in Student Loans

Rehab Defaulted Student Loan Hurt Credit Report?

Repairman — Wed, 15 May 2019 23:15:35 GMT

I have several very old defaulted Federal Student Loans that dropped off from my credit report over a decade ago; having been removed from my credit report completely after appearing for 7 years as negative trade lines. In the time since then, my wages had been garnished a few times, and that money was used toward paying down the balances. Now that I'm more financially secure, I want to contact the Federal Government about rehabilitating the loans and working toward getting them finally completely paid off. My wages are not currently being garnished, and I'd like to avoid that again, and just work out a payment plan...

My questions are: will they be open to not garnishing wages again / stop garnishment if I agree to a payment plan?

Also, more importantly, will me starting up payments on the loans again, cause them to appear on my credit report again, thereby negatively impacting my scores and showing as negative trade lines of defaulted loans and increased debt...for the next 7 years?

Help!!!!!

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Wed, 15 May 2019 22:23:05 GMT

Student loans are the gift that keeps on giving. They never go away and just because they aren't there now doesn't mean they won't pop up unexpectedly.

As for rehab, if you call to set up a payment plan, that stops all adverse action. You would not be garnished while following a repayment plan voluntarily.
You'll also feel better knowing it's not hanging over your head.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Repairman — Wed, 15 May 2019 22:34:13 GMT

@Anonymous wrote:
Student loans are the gift that keeps on giving. They never go away and just because they aren't there now doesn't mean they won't pop up unexpectedly.

Thanks for the replies...these loans have not reported on my credit reports for well over a decade and I'd hate for them to pop up again now due to repayment, just as I'm getting my score back up to good standing...anyone know if they will?

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Wed, 15 May 2019 22:37:12 GMT

Have you received any notices? Do you know the balances? HOW do you know the balance?

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Repairman — Wed, 15 May 2019 22:55:29 GMT

@Anonymous wrote:
Have you received any notices? Do you know the balances? HOW do you know the balance?

Notices have always continued to come, but I always ignored them as I did not have the funds to pay them. Today, I looked them up on the Federal Student Aid Website, and saw all the loans listed and their balances.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Wed, 15 May 2019 23:06:17 GMT

Ok. So they haven't 'disappeared '.
Where are you getting tour credit reports and are you pulling all three? They may actually be showing up.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Repairman — Wed, 15 May 2019 23:13:03 GMT

@Anonymous wrote:
Ok. So they haven't 'disappeared '.
Where are you getting tour credit reports and are you pulling all three? They may actually be showing up.

They disapeared from my credit reports. Yes I am monitoring all 3 direct from Fico. They dropped off my credit reports years ago, as previously stated after 7 years of reporting as defaluting. While they were on there, my credit score tanked, obviously, but then when they dropped from my reports after 7 years, my scores shot up. My reports have had no sign of them ever since.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Wed, 15 May 2019 23:26:25 GMT

Hmmm... I got nothin' 🤷🏽‍♀️

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Wed, 15 May 2019 23:48:44 GMT

The unfortunate thing about federal loans is that servicers and collection agencies rarely tell people about their options when it comes to student loans for those who are unable to afford the plan they are put on (often still on standard repayment). At any point they could have informed you about the plans that take your income into account. I'm only saying this because while your income is steady and your goal right now is to pay down your loan, if you ever find yourself in the same or similar financial position, you have options. You might read up on the income-driven repayment plans, especially Income-based repayment and REPAYE/ PAYE. They recertify annually, so being on them can be temporary. They have interest subsidy benefits and will count as positive payments.
That aside, I think it's still in your benefit that you contact the Dept of Education and try to pay this loan off. You don't want it to get sent to another collection agency that will choose to report to the CBs. Given that the loan isn't paid off, I think this is still possible. Federal loans are unique.
If they start reporting, you'll have far fewer options. You don't have enough payments left for rehab and consolidation won't remove the default.
If it gets reassigned and they try to garnish you, in order to stop it you'll have to make voluntary payments in the amount (percentage) that is listed on the form, within the deadline. Hopefully it doesn't come to that.
Any questions?

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Repairman — Thu, 16 May 2019 00:33:18 GMT

@Anonymous wrote:
You might read up on the income-driven repayment plans, especially Income-based repayment and REPAYE/ PAYE. They recertify annually, so being on them can be temporary. They have interest subsidy benefits and will count as positive payments.
That aside, I think it's still in your benefit that you contact the Dept of Education and try to pay this loan off. You don't want it to get sent to another collection agency that will choose to report to the CBs. Given that the loan isn't paid off, I think this is still possible. Federal loans are unique.
If they start reporting, you'll have far fewer options. You don't have enough payments left for rehab and consolidation won't remove the default.
If it gets reassigned and they try to garnish you, in order to stop it you'll have to make voluntary payments in the amount (percentage) that is listed on the form, within the deadline. Hopefully it doesn't come to that.
Any questions?

From the little I've recently seen on the income driven repayment, I think I want to try to avoid that since it will cause interest to just continue to baloon for a longer period of time, moreso than just trying to pay a higher monthly amount...any thoughts on whether my new payments would cause these loans to reappear on my credit reports, fresh, for a new 7 year period?

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Thu, 16 May 2019 00:46:08 GMT

You can always pay ahead even on an income driven repayment plan.
Over the past year I have doubled up on payments whenever I got a bonus or whatever. I'm currently 7 months ahead. I'm keeping a bit ahead of the interest.

As for your question regarding whether or not they'll show up, hopefully someone else will chime in. My thought is that if they haven't been reporting they may or may it. It really depends on the loan servicer.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Thu, 16 May 2019 01:06:34 GMT

Income-driven repayment plans are designed to reduce your minimum payment. If you're not seeking forgiveness (in which case it's very important not to pay ahead) then there's nothing wrong with paying extra. The added bonus is the interest never capitalizes and there are interest subsidies which you probably won't be able to take advantage of. Best bet is to enter your loan and income information manually into the repayment estimator (don't sign in) and see where that leaves you.
In order to access these programs you have to get out of default. You could rehab or consolidate (100% utilization, new loan) and get put with a be servicer. Rehabbing if nice because you get an old tradelines with good payments history. Currently you are at the whim of the collection agencies. It might decide to report the debt, then there goes your credit score again. Imo your best bet is to get out of default ASAP. Otherwise, it's a gamble.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Repairman — Thu, 16 May 2019 02:01:36 GMT

@Anonymous wrote:
Income-driven repayment plans are designed to reduce your minimum payment. If you're not seeking forgiveness (in which case it's very important not to pay ahead) then there's nothing wrong with paying extra. The added bonus is the interest never capitalizes and there are interest subsidies which you probably won't be able to take advantage of. Best bet is to enter your loan and income information manually into the repayment estimator (don't sign in) and see where that leaves you.
In order to access these programs you have to get out of default. You could rehab or consolidate (100% utilization, new loan) and get put with a be servicer. Rehabbing if nice because you get an old tradelines with good payments history. Currently you are at the whim of the collection agencies. It might decide to report the debt, then there goes your credit score again. Imo your best bet is to get out of default ASAP. Otherwise, it's a gamble.

So your reccomendation is to contact Dept of Ed, request to rehab loans, and then once they are rehab'd (something like 9 months later) request to be put on the income based payments?

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Repairman — Thu, 16 May 2019 02:05:48 GMT

@Anonymous wrote:
Best bet is to enter your loan and income information manually into the repayment estimator (don't sign in) and see where that leaves you.

Also, where can I find the repayment estimator? I was given a link, but it leads me to a "Page Not Found" notice.

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

calyx — Thu, 16 May 2019 15:13:52 GMT

@Repairman wrote:
@Anonymous wrote:
Income-driven repayment plans are designed to reduce your minimum payment. If you're not seeking forgiveness (in which case it's very important not to pay ahead) then there's nothing wrong with paying extra. The added bonus is the interest never capitalizes and there are interest subsidies which you probably won't be able to take advantage of. Best bet is to enter your loan and income information manually into the repayment estimator (don't sign in) and see where that leaves you.
In order to access these programs you have to get out of default. You could rehab or consolidate (100% utilization, new loan) and get put with a be servicer. Rehabbing if nice because you get an old tradelines with good payments history. Currently you are at the whim of the collection agencies. It might decide to report the debt, then there goes your credit score again. Imo your best bet is to get out of default ASAP. Otherwise, it's a gamble.
So your reccomendation is to contact Dept of Ed, request to rehab loans, and then once they are rehab'd (something like 9 months later) request to be put on the income based payments?

I think this is absolutely the best way to go.
I mean, sure, they fell off of your reports, and we can't tell you if the past late payments will reappear upon rehab (I think probably not, but I'm no expert).
As has been mentioned - if they're sent to a new servicer, then they may stick them on the reports and garnish, and I think that's a greater risk.

Also yes, you can pay more than your IDR payment. I'm on IDR (ICR, really), and I pay 3x my payment, but what's nice is that if I have a rough month (some other emergency), I know that I can always pay them less (my regular payment) and still be current. Plus most servicers will offer you a discount if you automate your payments (it seems to be .25%). I have two automated payments - one through the servicer for my IDR amount, and a billpay through my bank for the extra (that way I don't have to fiddle with the servicer if I want to "just" pay my minimum). I periodically make extra payments when money appears because I'm trying to whack these things down. I promise - servicers never get mad if you want to give them more money!

Here is the calculator page I've used: https://studentloans.gov/myDirectLoan/repaymentEstimator.action

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Anonymous — Thu, 16 May 2019 13:42:11 GMT

Yep, Dept of Education and rehabbing. I don't know if you can do it before they get placed when another collection agency but I'm sure they'll let you know. Income-driven repayment plan is up to you but if you run into any difficulty don't hesitate to switch. I also don't know your total balance and if you'll benefit from forgiveness.
https://studentloans.gov/myDirectLoan/repaymentEstimator.action