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Defaulted Student Loan help

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Defaulted Student Loan help

Hi all,
I have federal student loans that were allowed to go into default. I'm now getting serious about cleaning up my credit since doing better financially. My question is if it is correct that I have 16 separate trade lines reporting on my credit from my loans.? I don't have 16 loans and also none of them actually say default but rather collection. I'm trying to decide whether to rehab them or consolidate for the best results. I'm also in the process of tackling other negatives on my credit and don't want to receive a high payment for months before getting them updated on my reports. Any help is appreciated.
Starting Score: 588, 579, 581
Current Score: 588, 579, 581
Goal Score: 720


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Message 1 of 14
13 REPLIES 13
Senior Contributor

Re: Defaulted Student Loan help


@SemiJoe wrote:
Hi all,
I have federal student loans that were allowed to go into default. I'm now getting serious about cleaning up my credit since doing better financially. My question is if it is correct that I have 16 separate trade lines reporting on my credit from my loans.? I don't have 16 loans and also none of them actually say default but rather collection. I'm trying to decide whether to rehab them or consolidate for the best results. I'm also in the process of tackling other negatives on my credit and don't want to receive a high payment for months before getting them updated on my reports. Any help is appreciated.

Could you list the accounts that your trying to get caught up on? We have a student loan expert @Sabii  that can help you on the SL part.





My posts are JMHO. I DO NOT claim to be a FICO expert. Just sharing my experiences from rebuild to recovery after BK DC. My siggy is not to brag at all. Just to show fellow members what can be accomplished when you do it right and play the FICO Credit Game.
Message 2 of 14
Member

Re: Defaulted Student Loan help

Yes I have a Jefferson capital closed old Verizon account witha balance of $848, an old First Premier charge off DOFD Feb 2016 for $444, a vehicle that was charged off DOFD April 2015 that they just have been adding fees to since then until it's now $30,331, and an old flexshopper account DOFD July 2016 but it shows 0 balance. Any advice will be appreciated and thanks for your response.
Starting Score: 588, 579, 581
Current Score: 588, 579, 581
Goal Score: 720


Take the myFICO Fitness Challenge
Message 3 of 14
Senior Contributor

Re: Defaulted Student Loan help


@SemiJoe wrote:
Yes I have a Jefferson capital closed old Verizon account witha balance of $848, an old First Premier charge off DOFD Feb 2016 for $444, a vehicle that was charged off DOFD April 2015 that they just have been adding fees to since then until it's now $30,331, and an old flexshopper account DOFD July 2016 but it shows 0 balance. Any advice will be appreciated and thanks for your response.

Jefferson Capital/Verizon are bears and wont PFD. So paying this off will stop the updating and will age off.

FP just go ahead and PIF so the util if high will not count against you any longer. They are see/saw with GW letters. Could be yes or no.

Flex Shopper with 0 balance. Is there a collection account with this?

Who was the vehicle with. Was it repo'ed and sold at auction? Is the 30g's+ the left over after auction? If it was sold at auction. Find out what the balance is after the sale.

Just need a few questions above answered to continue.

Welcome to the forums BTW!





My posts are JMHO. I DO NOT claim to be a FICO expert. Just sharing my experiences from rebuild to recovery after BK DC. My siggy is not to brag at all. Just to show fellow members what can be accomplished when you do it right and play the FICO Credit Game.
Message 4 of 14
Established Contributor

Re: Defaulted Student Loan help

Hi,
16 could be accurate, depending on what type of loans you have and when you attended school. My suggestion would be to look on the National Student Loan Database (NSLDS) website. It will have the dates each loan was disbursed with other details.
If you have collections you want to focus your payments on, I would understand wanting to put off any payments to get the loans out of default. Keeping in mind that since your loans are in default, they can garnish your wages (amongst other things) at any time. It sounds like you're financial stable so the Garnishment will likely go through. Once this happens, from what I understand consolidation is no longer an option. To stop it from happening, you can make voluntary payments. Unfortunately, this is 15% if your income. So basically your real choices are reconsolidation/ consolidation now... Or taking your chances by doing it later.
The difference between rehab and consolidation is that rehabbing tends to offer more benefits to people. After 9 payments your loan will be returned to the servicer and the default will be removed. Sometimes people can get the lates removed but it's not a guarantee. It would preserve all of your tradelines, which will be a plus for your credit score, and you get to resume a normal plan which includes IDR, or Income-driven repayment plans. The payments are based on income during rehab and can be incredibly affordable because they can take into account expenses. If I were you I'd look into if you entered into an official payment agreement with some of the collections if that could be counted as an expense.
Consolidation is usually what people choose when they are on a time-crunch (mortgage), have significant loans with a high income, or have already used up their rehab and ended up defaulting again (common). It gives you one brand new tradelines with the balance of all of the loans combined, at 100% utilization. This lowers your average age, closes the other accounts (and will age off) and will show as a brand new tradeline. The default stays.
Hope that helps. Feel free to ask further questions.
@Calyx



Message 5 of 14
Valued Contributor

Re: Defaulted Student Loan help

+1 to everything Sabii said.

I have consolidated loans from a (second) default.    I rehabbed a default, and the same thing - it didn't say default, it said collections.  That's the same thing.  You defaulted on your loans and the servicer sent it to collections, so the comment is correct.
I will tell you that it's best for your financial well being *and* your credit score (your finances should always come first, though I know a lot of people focus on their scores) if you rehab your loans.   If 15% of your income is too high, just be honest with your servicer and they will likely work on a payment plan that will work for you.

If/when you rehab, the default will be removed, and you'll have a lot of positive/older tradelines, and that's good!   MANY servicers will delete lates and other negative information along with the default, please note, they DO NOT need to do this, so don't expect it. Just enjoy the positives if they do.   If they do not delete the lates, you'll have to wait the standard 7y from the date of first delinquency (DOFD).

If you consolidate all of the defaults will stay on your credit report, and you cannot consolidate or rehab a second time (so not consolidating means that if something happens again, you would at least have that option).

There is a problem with servicers not communicating with borrowers when the rehab is complete, so please stay on top of your student loans.  I was in a tumultuous place when my rehab ended and I was not notified of my new servicer, but missed it since I wasn't staying on top of things and that's how I ended up in a second default.   Servicers can tack on a lot of fees, so you don't want them to be in default any more than possible.

And just to address the multiple loan thing - every semester/unit you borrowed was a separate loan, so even if you're making one payment, it is being divvied up between your loans for you, it's a nice service (some servicers make you submit a payment for each loan, which can be irritating).     You did take out multiple loans, a lot of times you didn't realize it then (I think I had 8?  4 semesters with subsidized/unsubsidized FFEL loans on each, for a total of 8).


Let us know if you have any more questions, between @Sabii and I can help you out.




Garden goal: keep on keepin' on until 2020.
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Message 6 of 14
Member

Re: Defaulted Student Loan help

Thanks for replying. The auto loan was with a company called Prestige Financial. To be honest, I'm not proud of it but I had temporarily changed my insurance to just liability coverage because I suddenly became disabled and while driving the car was totaled by my spouse. The car went to the tow yard and the company was informed of it. The car did have gap insurance so they received the gap portion of the coverage but they never adjusted anything about the loan. They just kept reporting it as if I never paid anything on the car and it was totaled. I had been paying on the car for almost 4 years at the time and bought it for only $19000. They are reporting like $18500 as high credit that was charged off and they've been every month since 2016 adding different random amounts to increase the balance owed all the way to now the 30k. It was totaled in 2016. I'm not sure the company is actually doing things legally but I'm just now getting started trying to clear this all up since I've just returned to working about 6 months ago. Any help is appreciated.
Starting Score: 588, 579, 581
Current Score: 588, 579, 581
Goal Score: 720


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Message 7 of 14
Member

Re: Defaulted Student Loan help

Jefferson Capital/Verizon are bears and wont PFD. So paying this off will stop the updating and will age off.

FP just go ahead and PIF so the util if high will not count against you any longer. They are see/saw with GW letters. Could be yes or no.

Flex Shopper with 0 balance. Is there a collection account with this?

Who was the vehicle with. Was it repo'ed and sold at auction? Is the 30g's+ the left over after auction? If it was sold at auction. Find out what the balance is after the sale.


So am I understanding correctly that FP will be counting in my utilization even though it is charged off and closed?

The Flexshopper account doesn't have any collection agency reporting anything on my credit but the remarks says it was sold and the balance is $0.

By the way I see you had a BK in your signature. I too had a BK in 2012 ch. 7. Is it really possible to get scores that high after a BK before it falls off in 10 years? Thanks again for your help!
Starting Score: 588, 579, 581
Current Score: 588, 579, 581
Goal Score: 720


Take the myFICO Fitness Challenge
Message 8 of 14
Member

Re: Defaulted Student Loan help

Sabii,

Thanks for the insight. So it seems rehabbing offers the most benefit. My questions then are 1) While rehabbing the loan will it continue to report negatively on my credit monthly, only removing the default once finished? 2) Does the rehab program consider spouses income as well? In preparation for some investments we are wanting to make we have kept expenses minimal and we probably have a combined income of about 160k with each of us making about half that amount. Will my payments to rehab the loans be extremely high based on this? If so, is there another recommendation, maybe better to consolidate in my case? Just trying to make a decision I can handle and get the situation taken care of. Thanks again for your help.
Starting Score: 588, 579, 581
Current Score: 588, 579, 581
Goal Score: 720


Take the myFICO Fitness Challenge
Message 9 of 14
Established Contributor

Re: Defaulted Student Loan help

You're welcome.
1.) I'm not sure. I think so, based on what others have reported. Once you finish and the loan is picked up by a servicer there is a period up to 3 months where your credit report "settles." Calyx would be able to answer this better.
2. ) Yes, I believe it does (AGI only I think). However, it also uniquely takes into account your expenses. This creates a more affordable plan than the actual regular plans can be. The income and expense form is available on the internet if you want to see it now. It's very extensive.
Does your spouse have any federal student loans?
Based on this, I would say that those 9 payments will give you some breathing room, especially if you want to address the other debts. Again, it would be worth it to find out if they could also be listed as expenses somehow.
What I meant by people who find it better to consolidate so high earners, I meant like doctors etc., people who will pay the loan off in a short number of years and just need to get out of default right now. I would stick to the rehab and while you're doing that you'll have almost a year to come up with working the sizeable payments you'll be making afterwards into your budget.
After you finish rehabbing, sounds like you'll benefit most from IDR, Income-driven repayment plans. The most popular are REPAYE/ PAYE and Income-based repayment, IBR plan. You can use the repayment estimator to see what your monthly payments will be about.



Message 10 of 14
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