Private student loans in default - reporting as Federal student loans

[clemente21]

Here's a question:  I have 2 private student loans that are in default with Key Bank for a total of about $8500.  I've been making payments to a CA in the amount of $333/mo to satisfy this account.

I noticed that these loans are reporting on my CR as "Claim filed with government for insured portion of loan".  These are private student loans, the government has nothing to do with or guarantee here.  Should I pursue this to get it off my report?  If so, how would I go about that?  Should I dispute the discrepancy to CRA?

[Anonymous]

I'm not responding to help, but I just wanted to tell you that I feel your pain. I also have student loans with Key Bank that defaulted and Key Bank is an absolute nightmare to work with. I should say that when a student loan defaults, the creditor does some sort of filing to essentially write off the debt as bad/uncollectable, which gives them a tax break. The statement about a claim being filed with the government (mine say that too) may be related to the tax write off - it's very possible that even though the loans are private, Kay has to file something with the government for the tax break.

I have spoken with Key at GREAT lengths about restoring the defaulted loans, etc and they are the most uncopperative people on the face of the earth. After six months of fighting with them, I've finally resorted to simply making the payments and hoping that I can get them to delete the charge-offs from my report once their paid off, though I doubt it'll be successful.

Good luck!

[clemente21]

Are your loans private or federal?  If they are federal, check out collegelendingsolutions.com.  They take you out of default and move you into a NEW line of credit at the same interest rate.  I tried talking to them, but they can't do anything to help since my loans are private.  Very nice to deal with though.

And yes, I hate KeyBank.  I literally cringe when I have to call them.  I can't wait to just be done them.  Hope you get through this also, man.  That last recession killed me.  Good luck.

[Anonymous]

Unfortunately, they are private loans as well. It's actually so nice to hear from someone else going through this because dealing with Key Bank has been so miserable. Can't wait to get the loans paid off and move on, though it'll be awhile for me since one of mine is for $33K - it was a law school loan. Unemployment stinks! (luckily, I have a great job now)

[Anonymous]

One other question - Who was the administrator of your loans? Mine were split between AES and Great Lakes. AES is another nightmare. Currently, my charged-off loans are being reported on my credit report by BOTH Key and AES so it looks like I have twice as many defaulted loans. I am currently trying to figure out how to fix the duplicates. Have you experienced this?

[clemente21]

AES also!  And yes, they did the exact same thing to me.  2 loans, 4 tradelines.  And that's killing my score!  I really wish I would've applied for all those stupid scholarships for $400 that I passed up.  Would've helped me out a lot right about now!  Good to hear from someone also dealing with this nightmare.  Can't wait to move.  $8,500 and it's over.

Sad thing is that I financed $7500 orginally.  Paid the rest cash.  I'm now $4000 into payments made and I still owed $8500!!! Yay for fees! 

[MBOhio2]

Bump.

Anyone out there that can help explain OP's confusion. I am confused about this exact same issue!

[Anonymous]

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@clemente21 wrote:

Here's a question:  I have 2 private student loans that are in default with Key Bank for a total of about $8500.  I've been making payments to a CA in the amount of $333/mo to satisfy this account.

I noticed that these loans are reporting on my CR as "Claim filed with government for insured portion of loan".  These are private student loans, the government has nothing to do with or guarantee here.  Should I pursue this to get it off my report?  If so, how would I go about that?  Should I dispute the discrepancy to CRA?

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The term private student loan is a misnomer as the vast majority of them are, in one way or another, backed at least partially by the government.  This is one reason why private student loans are no longer ordinarily dischargeable in bankruptcy and why the credit reporting time period on student loans can be infinitely longer than the normal 7 - 10 years for other derogatory tradelines.

The mechanism by which lenders securitize their private student loan portfolio with the government is complex, but it can and is done.  Unless you can bully the CRA or the creditor into removing the remarks, you really have no recourse.

Instead, I'd count my blessings that you have a payment plan that seems to be working for you because otherwise things can go south rather quickly and private student loans can be relentlessly and aggressively pursued the same as federal direct student loans.

[mauirain]

I don't know about Key Bank student loans, but my brother was in default with Wells Fargo.  I did some research and found the website for ECMC.  They have a Student Loan Rehabilitation Program where if you are in default, you can get into this program.  They require that you pay one percent of your loan per month for 9 months, then your loan is re-sold and it becomes like a new loan.  All collections cease and they stopped the federal offset as well.  I am not sure if all Student loands can do this, but they allowed him to do it.