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Default loans + rehab in progress

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Anonymous
Not applicable

Default loans + rehab in progress

I'll try and provide as much as I can, I am aware that I made a lot of mistakes a long the way but the point is that I'm trying to fix it no matter the cost or the time it takes. 

 

So I took out a total of 9 loans (that's what it says) from 2011 to 2013, all 9 are Direct Stafford Loans (6 were unsubsidized and 3 were subsidized). All in all the total came out to $22,330 (as of today that balance is $28,598 = $1,921 in interests and $4,346 in fees & costs). My loans fell into repayment and forbearance about 4 times each before they all fell under "Defaulted, unresolved" as of 2017. I got a letter from the U.S. Department of the Treasury in 2019 that my tax return was applied to my debt (the amount was a little over $1,000, at this point no attempt to garnish from my wages was made but I suspect that was step #2). By June of 2019 I finally got in contact of the collection agency that was now trying to collect from me and I was placed into a loan rehabilitation program and have so far made 4 out of the 9 monthly payments (I'm counting 4 because it's on auto-pay to a card that I deposit money to specifically for this so I take no money out from it). 

 

I was checking my credit score and it went up by 20+ points (I took out a credit card and am paying the full amount instead of the minimum amount and opened up a new account where I'm paying a minimum for a total of $500+ borrowed which I intend to pay in full by December). 

But then I saw that it said that my Payment History Changed that says that one of my 2015 payment status for one of my stuent loans was updated from 180 days late to 120 days late, what does this mean? I also had 9 derogatory marks before I did all this (the loan rehab) but now I can't see them on my report, why is that? 

 

And it says I have 10 accounts (not 9) but the 10th says that the balance is $0 (under USDOE/GLELSI). I made payments to this one a while back but now on NSLDS it says it was "DEFAULTED, SIX CONSECUTIVE PAYMENTS, THEN MISSED PAYMENT(S)". 

 

If I'm making payments through a rehab program, will my tax return for 2019 also be taken? (I don't mind if it's put towards the loan at this point, anything helps). What happens after the 9 payments are made? Can someone who has completed the process tell me how it goes? What red flags should I look out for? 

 

What mistakes am I still making? how can I improve my situation? what else can I do? 

 

Message 1 of 18
17 REPLIES 17
calyx
Super Contributor

Re: Default loans + rehab in progress

I've rehabbed in the past.

Your 2019 tax return will not be taken (assuming you complete rehab).

When you are done paying your 9 payments, your loan will be assigned/picked up (verbiage may differ, end result is the same) by a student loan servicer who should contact you to set up payment/account information.


Please make sure you stay on top of who has your loan.   A not-insignificant number of borrowers re-default because they don't get notification from their (new) servicer and I would really hate for that to happen to you.    When you talk to your new servicer, you should be able to set up whatever payment plan you need (if you're doing any kind of forgiveness program, this will be important - @Sabii knows that information better than I) and get your account all set up and ready to go.  Most servicers offer a modest APR reduction if you do an automatic payment plan.

As far as your credit reports:  after your rehab is done, the default will be removed from your credit report.  Some servicers remove lates, some do not.  Please note that it is not required that they remove any negative information other than your default, so if the lates stay, don't think something went wrong.    Student loan servicers also take a really long time to update their accounts with the CRAs (mine took more than 4 months), so you might have to sit tight and wait a bit to see how everything shakes out.    If the servicer does not remove lates, you are more than welcome to try to write goodwill letters to get them removed.  It rarely works, but it can, so you'll have to decide if you want to pursue that route, or just let your lates age off.   

I'm not sure what is going on with that one changing lates, but while I was going through my consolidation (another process altogether), my loan reporting shifted all kinds of ways and since it wasn't doing any damage, I just ignored it until everything was done.

 

Can you give more information about where you're seeing that mystery 10th loan from?   Is it on just one of the CRA reports or all of them?   I had really inconsistent reporting between my CRAs (they were all actually wildly different) with my student loans, but eventually they did all shake out.   Have you downloaded your student loan information from NSLDS?   You'll want to keep an eye on it from there, it's your most official record.

 

 

Happy practitioner of AZE7or8or9or10 | Team Finances > FICO
Message 2 of 18
Anonymous
Not applicable

Re: Default loans + rehab in progress

The mistakes you've made are no different than many students. We've all been there. What sets you apart is your willingness to fix your situation. 🙂

Sounds like you've already good a plan. Rehab was a great decision and once you're finished and everything settles you'll be back on track. Keep in mind that you can rehab only once and to compete the rehab you just make all 9 payments on time. It helps to set these up too come out a few days early. Also (at the risk of sounding paranoid), trust no one. Keep a record of who you talk to, bills, statement, letters, any paperwork, etc. It's always wise to keep track of this stuff with student loans, especially after a default.
I don't know where the 10th loan is coming from but if the NSLDS says you have it you may have it. Check to see if it wasn't sent to another collection agency or if it's not just combined into one of the 9 existing loans by doing the math(I've seen them do both).
The lates change sounds like a gift horse but it won't really matter until you finish rehab and everything settles on your report.
Once you're done with rehab, and you're going to be picked up by a servicer again, you'll need to pick a payment plan. IDR (income-driven repayment) plans are usually the best plan and leads to forgiveness in 20/25 years. Your payments can be as low as $0 and there may be an interest subsidy if you pick the REPAYE or IBR (income based repayment) plan. In addition, if you've been making payments on those plans before default you already have qualifying payments.
Do you have any questions?
Message 3 of 18
calyx
Super Contributor

Re: Default loans + rehab in progress


@Anonymous wrote:
The mistakes you've made are no different than many students. We've all been there. What sets you apart is your willingness to fix your situation. 🙂

Sounds like you've already good a plan. Rehab was a great decision and once you're finished and everything settles you'll be back on track. Keep in mind that you can rehab only once and to compete the rehab you just make all 9 payments on time. It helps to set these up too come out a few days early. Also (at the risk of sounding paranoid), trust no one. Keep a record of who you talk to, bills, statement, letters, any paperwork, etc. It's always wise to keep track of this stuff with student loans, especially after a default.
I don't know where the 10th loan is coming from but if the NSLDS says you have it you may have it. Check to see if it wasn't sent to another collection agency or if it's not just combined into one of the 9 existing loans by doing the math(I've seen them do both).
The lates change sounds like a gift horse but it won't really matter until you finish rehab and everything settles on your report.
Once you're done with rehab, and you're going to be picked up by a servicer again, you'll need to pick a payment plan. IDR (income-driven repayment) plans are usually the best plan and leads to forgiveness in 20/25 years. Your payments can be as low as $0 and there may be an interest subsidy if you pick the REPAYE or IBR (income based repayment) plan. In addition, if you've been making payments on those plans before default you already have qualifying payments.
Do you have any questions?

I meant to mention what Sabii said above - Keep a log/file of notes of who you talked to and when.   I've done the same thing and it can be very, very helpful.

Happy practitioner of AZE7or8or9or10 | Team Finances > FICO
Message 4 of 18
Anonymous
Not applicable

Re: Default loans + rehab in progress

(New account, forgot my password of my other one so I can't access it)

 

By the time I file my 2019 taxes I'll be on my 7th out of 9th payment, so I'm guessing my tax return will be garnished towards my loans right?

 

The 10th one is as follows: 

Payment Status: Account transferred to another office (At least 120 days or more than four payments past due)

Updated: Dec 1, 2017 

 

I looked at what's listed on NSLDS and from debt collection bills I've received and there's only 9 listed on there. So why would it list a 10th? I matched up all 9 other loans to those 9 accounts, I'm not missing any on there. All CRA report the same thing, a 10th account (closed) with $0 balance. 

 

 

Message 5 of 18
Anonymous
Not applicable

Re: Default loans + rehab in progress

The 10th loan's information:

 

Payment Status: Account transferred to another office (At least 120 days or more than four payments past due)

Updated: Dec 1, 2017 

 

I think this might be a mistake (it appears the same on all CRAs), the most in loans I've taken was originally almost $4,000. I think it's a combination of all the loans or something else. But the total amount on the NSLDS page says $22,330. (Amount as of Sept 2019 is $28,547.15) 

 

                                                                                             

# | Type of Loan | Status | Loan Amount | Loan Date | Disbursed Amount | Canceled Amount | Outstanding Principal | Outstanding Interest

1 DIRECT STAFFORD UNSUBSIDIZED | Defaulted | $1,593 | 01/16/2013 | $1,593 | $0 | $1,862 | $250 (5)
2 DIRECT STAFFORD UNSUBSIDIZED Defaulted | $1,330 | 01/16/2013 | $1,330 | $0 | $1,577 | $212 (9)
3 DIRECT STAFFORD UNSUBSIDIZED Defaulted | $670 | 01/16/2013 | $670 | $0 | $795 | $107 (7)
4 DIRECT STAFFORD SUBSIDIZED Defaulted | $4,500 | 01/16/2013 | $4,500 | $0 | $4,795 | $205 (1)
5 DIRECT STAFFORD UNSUBSIDIZED Defaulted | $1,554 | 05/09/2012 | $1,554 | $0 | $1,921 | $257 (6)
6 DIRECT STAFFORD SUBSIDIZED Defaulted | $3,500 | 05/09/2012 | $3,500 | $0 | $3,687 | $157 (3)
7 DIRECT STAFFORD UNSUBSIDIZED Defaulted | $1,140 | 01/11/2012 | $1,140 | $0 | $1,444 | $193 (8)
8 DIRECT STAFFORD UNSUBSIDIZED Defaulted | $2,000 | 10/08/2011 | $2,000 | $0 | $2,562 | $343 (4)
9 DIRECT STAFFORD SUBSIDIZED Defaulted | $3,500 | 10/08/2011 | $3,500 | $0 | $3,687 | $157 (2)

** Last number in brackets () corresponds to the number it's listed under 'accounts' on all CRA. 

 

I have a question about IDR. If let's say I made a payment of $200 a month for 12 years, during that time will interest/fees go up by a lot? Also, what if within that time I decide I want to pay something like $1,000 on one of those months, would they allow me to do that? And what if I have like $3,000 left to pay and decide to pay it all at once, will they allow me to do that? 

 

 

Message 6 of 18
calyx
Super Contributor

Re: Default loans + rehab in progress


@Anonymous wrote:

(New account, forgot my password of my other one so I can't access it)

 

By the time I file my 2019 taxes I'll be on my 7th out of 9th payment, so I'm guessing my tax return will be garnished towards my loans right?

 

The 10th one is as follows: 

Payment Status: Account transferred to another office (At least 120 days or more than four payments past due)

Updated: Dec 1, 2017 

 

I looked at what's listed on NSLDS and from debt collection bills I've received and there's only 9 listed on there. So why would it list a 10th? I matched up all 9 other loans to those 9 accounts, I'm not missing any on there. All CRA report the same thing, a 10th account (closed) with $0 balance. 


As far as your tax return, you'll have to ask the servicer.  Mine was not, however, I believe it's up to the servicer.   If you are concerned, you could always have your tax return "applied" towards next year's taxes.   It's a heckuva interest free loan for the government, but it gives you a year (although if they take it, that's more money applied to your loan now and reduced interest for you down the road).

 

As far as your 10th loan - like your subsequent post mentions, it might be that Great Lakes lumped them together for their collection reporting purposes.    I would be curious to know if they will delete it after your rehab.   And remember that interest and fees have been added to your loans, so it may have been that amount in 2017 when it was defaulted.

Great Lakes is one of the few servicers who seems to be more amenable to goodwill deletions, so if they don't automatically delete, I would see if they would be willing to do so with a goodwill afterwards (for what it's worth, my servicer deleted my entire delinquent loan tradeline after I got everything sorted out, with a very humble goodwill request that only ask they delete it from one CRA who was reporting it all wrong).

 

I have a question about IDR. If let's say I made a payment of $200 a month for 12 years, during that time will interest/fees go up by a lot? Also, what if within that time I decide I want to pay something like $1,000 on one of those months, would they allow me to do that? And what if I have like $3,000 left to pay and decide to pay it all at once, will they allow me to do that? 

 

(added in the quote above from your next post because I didn't want to clutter the thread too much)

 

How much your interest will go up will just depend on your interest rate, total amount owed, and how much your payment is.  Because of my income and family situation, my ICR payment is actually more than my interest, so I would be knocking down my principle by a little.    BECAUSE your loan is no longer in default, you should not be accruing more fees, which will help you a lot (even if your payment is 0).     

 

If you want to pay more, they WILL allow you to do it.  How the servicer handles it is up to them.   I pay more than the minimum on my loans every month, plus when I get a small windfall I split it 50/50 with my savings and SLs (I recently threw $1000 at them because I got a deposit back, and my servicer allows one time payments on their payment portal - I already have a monthly set up).   They generally pay off the interest owed first, and then will pay any extra towards the principle. 

 

It'll look something like this (ymmv, different servicers, etc...) - but you can see I'd accrued ~$10 in interest that they paid first and then the rest went to the principle (simple interest, daily accrual, I only have two loans -kinda-)  :


loanpayment.png

 

In my case, it is *also* pushing my payment out (so I'm paying down principle, plus paying 'ahead' on my loan).   Your servicer should have that information on their website (how they handle extra payments), but I would also contact them to be sure (in my case the website and CSR said the same thing)

 

Sorry if that's too much info, but I was so confused when I started the whole thing, I just want to tell everyone everything Smiley Wink

Happy practitioner of AZE7or8or9or10 | Team Finances > FICO
Message 7 of 18
Anonymous
Not applicable

Re: Default loans + rehab in progress

You said you're 4 payments in to your payments... That means you'll be ~8 payments in by the end of 2019. I think you're overthinking the tax thing. You need to file to get your return, right?.... Just don't file until closer to April.

From your loan amount and the amount you're talking about in payments, I'm guessing your income does not support you getting anything forgiven. In that case, the lower minimum payment is nice... But it's just too give you breathing room. You should actually make the payment that you can afford because the interest may not capitalize, but you'll still be paying it and you won't likely benefit from the interest subsidy (when the government pays for all or a portion of your interest not covered by your payments).
Here is the payment estimator so you can determine what your payments will likely be:
https://studentloans.gov/myDirectLoan/repaymentEstimator.action
And here is a student loan repayment calculator to help you see how adjusting payments will affect the total amount you'll pay on the loan:
http://www.finaid.org/calculators/loanpayments.phtml
You can pay off any of the loans at any time, so far as you also meet the minimum payment good the rest (Each minimum payment is applied to the individual loans in an certain way)
Hope this helps.
Message 8 of 18
Anonymous
Not applicable

Re: Default loans + rehab in progress

I was asking about my tax return because I didn't know what would happen when I file in December 2019/January 2020. I'm honestly not even worried about that money, if they put it towards the interest (or the loan) it's less for me to deal with. (Reply to @ too)

 

When I get picked up by a new servicer, do I file on my 2020 taxes that I'm paying for my student loans? 

 

I'm sorta getting an idea of what's going on now, it was a little too much at the beginning because I honestly didn't know how deep this went and for how long I let this get out of control. Thank you for replying. 

Message 9 of 18
Anonymous
Not applicable

Re: Default loans + rehab in progress

I understand, and I don't know either. But since you will have a payment it two left after the new year, my suggestion is similar don't file when you normally would. You have until April, so just file after it's out of default. They definitely can't take anything then.
If your refund was offset by filing earlier, I don't know how it would be applied. Calyx can answer better. I'm just a bit of a control freak with my loans now and I'd personally put the tax refund to the loans myself after it's given back to a servicer.

Something to think about a ways down the road would be to find out of their numbers are correct. You can make a spreadsheet to fill in APR each month, balance, interest and see if it all adds up correctly. It's time-consuming but in the end there's likely a mistake somewhere and it will save you a little money.
I think what you're doing is courageous and responsible. Keep up what your doing and everything should fall into place.
Let us know if there's anything else you ever need help with. 🙂
Message 10 of 18
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