Default loans + rehab in progress

[calyx]

Is there a reason you file so early?

  
The average person files later because we need time to get all of our documents (W2s, 1099s, etc).   I pretty much file before everyone else I know, and that's in February (my financial institutions get their forms to me quickly, my workplace gets me my W2 the day after payday, and I have a pretty simple tax return).

The only document you'll need to worry about for your student loan will likely be your 1098-E, which is for your student loan interest deduction.

Even when I defaulted, I received one, so as long as you qualify you'll get it.   Once you are no longer in default, it might be easier to get it from your servicer (mine was available for download pretty quickly).

[Anonymous]

Okay, so what I've gathered so far:

1. File taxes after my 9th payment (February 2020) and I have until April to do it.
2. Keep track and documentation of everything from start to finish.
3. Keep tabs on when I who my new servicer is.
4. Once I'm no longer defaulted, ask for a 1098-E from my servicer.

I usually file my taxes around the first week of January. My question is, if I file my taxes in say March, when does the count on my income stop? It just stops on my last pay of December? (I'm asking because if I make "too much" my medical insurance will go up and that's more expenses I have to think about). That's also another issue with filing early, I have until December 2019 to renew my medical insurance, what would I be putting as my income if I were to file in March? I think I'm going to speak to my insurance about this one, I'm sure I'll figure it out.

I used the repayment calculator, if I make the same amount (with a 5 % interest) the options for "Standard" is $257 / mo. for 120 months for a total of $30,889. My current "balance" is $ 24,248, even though bills in the mail say its $28,000 (about that amount). For what I earn $257 eats a lot out of my pay, I pay something like $300-$350 in bills and my job is not steady so I could be working 86 hours two weeks and 70 hours the next two weeks. Sometimes I'm working only 40 or 60 hours in two weeks total. I'm currently in the process of leaving my current job (doing a part time job) and just saving up for next year to still be able to make payments.

I have a question though, if I have "9" accounts and I'm paying say $257 a month, is the $257 being put towards all 9 accounts? Wouldn't it be better to consolidate them into one loan? Or is that too much for a loan of $20,000+? When should I consider consolidating or can I even do that if the amount gets smaller?

I also ordered out all my loans (not including the full account numbers) to get a better idea of where I'm at:

Image: https://imgur.com/xl8PB60

[Anonymous]

Yes, great list. I would also add to do some research in the coming months so you'll know what plan you need to be on. I think I gave you a link to the repayment estimator.

Thank you for asking questions about things you're not sure of. When you file your taxes in 2020, they will be for the year 2019. They give you a large window to do so. It doesn't change the period the taxes are for though. Sometimes I do mine in January, sometimes I'm lazy and do them in April. It doesn't change anything other than when I get my refund. As far as the insurance, they are asking for a previous tax year; nobody has filed taxes yet. Nothing changes in how you do that. The form you get from your insurance for 2019 tax purposes will just be filed later. (I'm not 100% sure what you're question is). One thing to think about is some health insurance has the ability to change plans/ update anytime with a change in employment (such as with Covered California).

I strongly recommend against the standard repayment plan. I believe this leads many borrowers into default a first and second time. Keep in mind, all these payment plans are about the *minimum* payment that will be required. You do not need to be on a high minimum payment plan to make larger payments. However you definitely need to be on a lower minimum payment plan like IDR plans if you maybe cannot afford that minimum payment. The standard repayment plan also has no forgiveness. You never know what might happen when you might need to qualify.
My suggestion is pick an IDR plan with a low payment. Pay what you can afford to pay, or at this time just pay the minimum and later when you're set in a new job you can pay more. The great thing with IDR plans, you can recertify early. So when you leave your job, you'll have no income. You'll recertify early, and have $0 minimum payments for the next year. On REPAYE and IBR the government will pick up all or part of the interest! (I can give you the details on that if you want). This will give you some breathing space. Or you can make payments, but now they will be flexible to what you can pay.
I think consolidation is rarely necessary, and often makes things worse. It's pushed by servicer's to make them make unnecessary changes. If you read the narratives on the failed PSLF applications, they pushed consolidation on PSLF people, knowing it would reset their Forgiveness payment counts. They are not looking out for you.
All you need to do is call up your servicer and ask them to group your loans. They might already be grouped. Then when you make a payment, it's actually the total of the minimum payments for each loan rolled into one amount. You're welcome to pay extra and even target the extra to certain loans. Consolidation will give you a brand new tradeline at 100% on your credit report and close out the older loans that are helping your file age nicely. After 10 years they'll age off. This is why people pay off student loans steadily but not at once when they can; it pushes back their oldest tradelines falling off. When the amount gets smaller, if you consolidate you'll go from multiple loans with reduced utilization to a loan with 100% utilization.
Hope this helps.

[Anonymous]

UPDATE: I've been picked up by Nelnet as of February 2020. I received a letter in the mail and created an account with them. On my credit history all the "delinquent" accounts have been removed and readded under Nelnet (there used to be 10 closed accounts, now 9 of them were added back on). Here is a screenshot of all the accounts. There are 9 accounts on my profile. 

Group: A
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 3.400%
Accrued Interest: $239.76
Last Payment Received:
Outstanding Balance: $5,034.94
Principal Balance: $4,795.18

Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT SUB
Interest Subsidy: Subsidized
Original Loan Amount: $4,500.00
Interest Rate: 3.400%
Accrued Interest: $239.76
Capitalized Interest: $456.20
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $4,795.18
Convert to Repayment: 11/24/2013
Disbursements: $4,500.00 on 02/14/2013

---

Group: B
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 3.400%
Accrued Interest: $183.86
Last Payment Received:
Outstanding Balance: $3,870.87
Principal Balance: $3,687.01

Loan: 2

Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT SUB
Interest Subsidy: Subsidized
Original Loan Amount: $3,500.00
Interest Rate: 3.400%
Accrued Interest: $183.86
Capitalized Interest: $292.21
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $3,687.01
Convert to Repayment: 11/24/2013
Disbursements: $3,500.00 on 05/09/2012

---

Group: C
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 3.400%
Accrued Interest: $183.86
Last Payment Received:
Outstanding Balance: $3,870.87
Principal Balance: $3,687.01

Loan: 3
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT SUB
Interest Subsidy: Subsidized
Original Loan Amount: $3,500.00
Interest Rate: 3.400%
Accrued Interest: $183.86
Capitalized Interest: $292.21
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $3,687.01
Convert to Repayment: 11/24/2013
Disbursements: $3,500.00 on 10/08/2011

---

Group: D
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 6.800%
Accrued Interest: $402.10
Last Payment Received:
Outstanding Balance: $2,964.22
Principal Balance: $2,562.12

Loan: 4
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT UNSUB
Interest Subsidy: Unsubsidized
Original Loan Amount: $2,000.00
Interest Rate: 6.800%
Accrued Interest: $402.10
Capitalized Interest: $637.22
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $2,562.12
Convert to Repayment: 11/24/2013
Disbursements: $2,000.00 on 10/08/2011

---

Group: E
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 6.800%
Accrued Interest: $292.57
Last Payment Received:
Outstanding Balance: $2,154.85
Principal Balance: $1,862.28

Loan: 5
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT UNSUB
Interest Subsidy: Unsubsidized
Original Loan Amount: $1,593.00
Interest Rate: 6.800%
Accrued Interest: $292.57
Capitalized Interest: $331.47
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $1,862.28
Convert to Repayment: 11/24/2013
Disbursements: $1,593.00 on 05/24/2013

---

Group: F
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 6.800%
Accrued Interest: $124.79
Last Payment Received:
Outstanding Balance: $919.30
Principal Balance: $794.51

Loan: 6
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT UNSUB
Interest Subsidy: Unsubsidized
Original Loan Amount: $670.00
Interest Rate: 6.800%
Accrued Interest: $124.79
Capitalized Interest: $151.05
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $794.51
Convert to Repayment: 11/24/2013
Disbursements: $670.00 on 02/14/2013

---

Group: G
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 6.800%
Accrued Interest: $301.50
Last Payment Received:
Outstanding Balance: $2,222.83
Principal Balance: $1,921.33

Loan: 7
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT UNSUB
Interest Subsidy: Unsubsidized
Original Loan Amount: $1,554.00
Interest Rate: 6.800%
Accrued Interest: $301.50
Capitalized Interest: $423.20
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $1,921.33
Convert to Repayment: 11/24/2013
Disbursements: $1,554.00 on 05/09/2012

---

Group: H
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 6.800%
Accrued Interest: $247.81
Last Payment Received:
Outstanding Balance: $1,825.15
Principal Balance: $1,577.34

Loan: 8
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT UNSUB
Interest Subsidy: Unsubsidized
Original Loan Amount: $1,330.00
Interest Rate: 6.800%
Accrued Interest: $247.81
Capitalized Interest: $299.99
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $1,577.34
Convert to Repayment: 11/24/2013
Disbursements: $1,330.00 on 02/14/2013

---

Group: I
Due Date: 03/22/2020
Fees: $0.00
Status: REPAYMENT
Interest Rate: 6.800%
Accrued Interest: $226.63
Last Payment Received:
Outstanding Balance: $1,670.99
Principal Balance: $1,444.36

Loan: 9
Due Date: 03/22/2020
Loan Status: REPAYMENT
Loan Type: DIRECT UNSUB
Interest Subsidy: Unsubsidized
Original Loan Amount: $1,140.00
Interest Rate: 6.800%
Accrued Interest: $226.63
Capitalized Interest: $346.38
School Name: xxxxxxx
Lender Name: DIRECT LOANS
Principal Balance: $1,444.36
Convert to Repayment: 11/24/2013
Disbursements: $1,140.00 on 01/11/2012

The letter said something along the lines of "You have 90 days to choose a repayment plan". Now my question is what do I do next? I filed my taxes already, I made something like $25,000 for 2019. Based on how much I make in monthly payments for the last 3 years, I make something like $700-$800 every two weeks on a normal check and $800-$900 on better weeks. Say I make $750 average every two weeks ($1,500). I pay something like $300-$350 in bills. Whatever I have left over I divide by 2 (1 part goes towards things I need to pay for and 1 part goes towards savings). 

I selected a Income-Driven Repayment Plan, it tells me:

Repayment Plan Monthly Payment
FDLP: Federal Direct Loan Program
Revised Pay As You Earn $48.08 StudentLoans.gov
Current Monthly Payment Amount: $52.00
Estimated Monthly Payment Amount: $48.08

My questions are:

1. Will the payment be spread to all 9 accounts? 

2. Will the interest be higher because of the plan I've chose? 

3. What happens to the interest I've already accumilated? Will payments go towards that first or just all 9 accounts in general?

4. Could I have them all lumped into 1 account? If so would that change how much I'd pay a month? Would it be higher? 

At the time my score was something like 532, as of now it's at 685. I've been making all my payments to my 1 other loan, credit card (currently at 57% usage, trying to lower that down or apply for an limit increase at the end of the year) and never missed a payment when rehabing my loans. 

[Anonymous]

Hi again! Congrats! 

What's the total on all the loans? 

Yes, you might call your servicer to make sure they are grouped but the payment covers all the loans. 

No, your interest will not be higher. However, it might be effectively lower. The reason being that of all the IDR plans, the REPAYE and IBR plans have loan subsidies. REPAYE has the most. If your payment does not cover all of the accruing interest: 

- Unsubsidized - 1/2 the interest not covered by your payment

- Subsidized - Al for the first 3 years. 1/2 thereafter. 

I'm on the same plan. 

There is another method you can use too that should lower your payment. You mentioned how much you make "in a good week." Normally you would use the IRS link up and have your payments calculated that way. But you can have them recalculate early if you want. And you can use your timesheets if your income varies. So you simply use your lowest paystub and have them recalculate it early. It has to be within 90 days of the paystub or timesheet (other methods are on the application for IDR plans) and type the frequency of pay on there (weekly). Then told send it off, checking the recalculation box. Once you get the lower payment, it's good for a brand new year. Same in you run into hardship or have unpaid time off. 

This is an in the fine print of your minimum payment letter 

3. It gets capitalized, added to the principal. But after you're on REPAYE it won't won't any more. 

4. You can ask them too. You don't have to consolidate. 

Keep the great questions!

[Anonymous]

I know this is late, but I just signed up for the rehab program and in the terms (I am keeping a copy handy at all times for future reference) state that any garnishments or tax withholding ceases immediately when you enter into the rehab program. Now, since it is a fed program, I would think verbiage would be similar regardless of the CA that handled it and once out of the rehab program (as early as after the first 5 payments) and no longer in default, you def should no longer be garnished or having your tax returns withheld. I would reference the terms of the program, but since you already filed your taxes, I'd be curious to know if they were actually withheld from you. Good luck and I am so happy for you that you has over 100+ point boost in your credit! I currently have 19 SLs reporting negatively to all 3 CRAs every month since 2016. My credit is sunk and I need to crawl out of the pit, but I will get there, and seeing other progress and personally just signing up for the rehab program gives me hope!

[Anonymous]

I just finished the rehab program. I filed my taxes this year and received my return in full, they didn't take it like they did last year (they took something like $1,000 and put it towards my loans). I saw someone else post about trying to get it back, but from what I've seen you don't get it back once it's been put towards your loans. As long as you're in the rehab or finished it and you're back on track they shouldn't take your tax return anymore.

While my loans were in default and I did the rehab program my credit score was in September 2019 was 532. I made all my payments on time and took out a credit card with a $200 limit and kept making payments on that too. My limit increased to $500 as of February 2020, I also signed up with "Self Credit Builder Account" for $526 and have made monthly payments (I will finish paying in August 2021, when it matures it will be deposited back into my bank account, this doesn't count the interest you end up paying though).

My score today is 681 now.

All those negative accounts will remain on your profile 7 years from the last payment you made on them (mine was in 2017 so they will fall by 2023, I thought it would have fallen by now because I took them out in 2011 but didn't know about when they fall in default or last payment they count from there).

So yes, my credit score went up 100+ and I intend to keep it going up.

Also from what I've seen, they only take your Federal return, not your state.

[Anonymous]

Thank you for the info!

I have an awful fico as you can see and it will not budge, but it sounds like I'm on the right track! My loans are really old and it went from I was young and dumb to working on it and then huge (and expensive) family problems kept me away from keeping up with my responsibilties.

I have a Self Lender loan that has been reporting successfully for the past 6 months and I just got a VS store card w/ 1k limit coming in the mail. I think those will help nicely for when the defaults drop. I'm not worried too terribly much about the tax return issues, as that is a whole other situation. Right now, there is nothing for them to keep, but not something I want to get into. Since the loans are old I think some defaulted in 2011 and other up to 2016, mos recently (the only one I tried to rehab). I have some issues with the rehab and loans I'm doing research on as far as repayment since I am similar to a travel nurse, but another specialty...income works wildly different. Also, I have loans defaulted with 4 seperate lenders, so I wonder if that is taken into consideration with payment amounts regarsing my "discretionary income". I will keep digging and probably make an official post on that.

Thank you again and congrats!