How best to handle a Student Loan that's delinquent

[Anonymous]

Hi all,

First post here - so I've been in the process of rebuilding my credit so that I can buy a home. I really only had a couple of negatives on my credit report; high (99%) credit utilization, 1 item in collections, and 1 of my student loan payments is 120+ days late.

Now, I've paid off my credit cards entirely, got the collections account deleted, and I'm left with 1 late student loan payment. Don't need to get into details about why it has been late, but it's safe to say that of my entire student loan debt ($26k+) my loan that is late is about $2k total.

My question is this - I'm trying to buy a home soon, like in the next couple of months. Should I call the loan company directly, suggest I can pay in full immediately in exchange for them deleting the 120+ day late payments (I have enough spare change to do this), or should I just start paying as agreed and see what happens. I'm not even sure if it's possible for them to delete the late payment record, but it was a thought.

What are thoughts on this? It's really my last obstacle to being able to purchase a home, so any help is appreciated. Thanks!

[Booner72]

How about paying for them to remove the lates instead of deleting?  How old is the loan?  It might be helping your score in terms of AAoA but those lates are definitely hurting.  There is a student loan section here and they might know more.......I have 2 90 day lates on my paid/closed Sallie Mae.  They won't budge on them.  I know I wasn't 90 days late two different times.  Especially since there is no 30/60 day lates leading up to the 90!

[NikJ4]

I would say call them to discuss payment for deletion of late not deletion of account.

Sallie Mae did the same thing to me because my i took classes at 2 different schools to qualify for part time status. Well, Sallie didnt count it as such as counted my 90 days late when i was "in School deferment" so needless to say they wont budge either. I called and they said, NOPE! Not happening. So I am stuck with it.

[Anonymous]

Thanks for the replies guys.

Yeah, that's what I ended up doing - I reached out to the company I pay my loans through, and they basically gave me two options: I could pay as agreed and the lates would still appear, or I could enter student loan rehab. Sounds like that's a minimum of 9 months, which I don't really have time for. He suggested I contact my school directly.

So I've emailed the Student Financial Services office at my college and have requested to pay in full for deletion of the lates on my account. Waiting to hear back, hopefully today!

[Anonymous]

Ok - I have some feedback which raises some more potential questions.

First, my college suggested that I had defaulted on the loans (I'm not certain about this and we're both researching it, but for the sake of argument, let's assume it's true), and that the only way to have late payments, etc removed from the credit report is through student loan rehabilitation.

My new question is this - what is best going to help my chances of being approved for a mortgage? 

Should I pay off the loan in full, immediately, and argue with the mortgage consultant that it's a prior account, all settled, and doesn't reflect on my ability to pay my mortgage?

Or should I enter Student Loan rehab, potentially taking 9-10 months, but having all the late payments, etc removed completely from my credit report?

I think that Student Loan rehab is the better long term option because the negative information on the account will stop hurting me after 9-10 months (maybe a bit more from what I've seen on these boards), HOWEVER, my concern is that entering student loan rehab shortly before applying for a mortgage could seriously come back to haunt me.

Any help would be seriously appreciated. Thank you!

[ang123]

My hubbys loan went through rehab- Id do it. They take preauthorized payments from your bank account. But heres the thing- you will have 12 months of good history AND those old 30/60/90/120 return to "on time".

If you dont have any revolving on time payments, Id do it. We did it last year, and are happy with the results. We are just getting rid of a few baddies and then we will be in place to buy a house.

Good Luck friend!

[Anonymous]

Hi all, 

So here's the update - the person working in Student Financial Services at my college was a real peach to work with. And I use the word peach about as sarcastially as one person could. 

After receiving a lecture about ethics and the ethics of deleting late payment history, etc, I gave up. I just decided that I would go ahead and pay the balance in full - figured this was the best way to affect my credit positively based on my research.

I do have one question though - how is this going to appear on my credit file? The account will now be a "closed" account meaning I have paid in full and I am no longer borrowing any money. It also never went to collections, so it's not as if a collections account will appear.

Will the account continue to appear on my credit report with the late payments? Or now that it's closed and paid in full, will it just fall off the credit report entirely? Any help would be appreciated - thank you!