@IamWesty12 Now you're really pushing the limits of my knowledge! 🤭. I'm building this plane as I fly it! Lol
From what you copied, I "believe" your loans may have been deleted from the CAIVRS. I kind of took "eligible defaulted federal student loans" as any loan that is currently eligible for the payment pause and 0% interest. I think the key word is Federal. The Department of Education must own the loan.
From the time you took out loans, did you ever refinance them or consolidate them with a private lender? Are you sure the government still owns your loans? Not to open a new can of worms...
Another thing to consider...if you do get the forgiveness and left with $4,000 owing...will that forgiveness be considered a "payment" and bring it back to your reports as $4,000 defaulted one year after the end of the payment pause when they start reporting defaults again?
If it was me, just my opinion, I would go for the fresh start initiative. No matter how it shakes out, you will be better off with those loans in your past and as a positive trade line if they ever do show up on your reports. As it stands now...you still owe the money and it will always haunt you, one way or another.
@teekay629 wrote:I consolidated three loans from Navient (interest included) into two loans earlier this year so they would count towards PSLF. They appeared on my credit report as brand new loans and the previous loans (not in default) as closed. The consolidated amount was also the starting balance as well. So there was no difference in how much was principal and how much was interest beforehand.
When you applied for the mortgage last year, were you denied and if so, was the defaulted loans part of it? If you rehab them, they will come out as current and so if you currently have $0 for student loans, the new amount will be the 24k until they are forgiven, which would drop down to 4k (provided that this counts for defaulted loans and you do not have to wait to graduate from rehabbing them). So there could potentially be a drop in your score since you would be "adding" the loans back onto your credit report.
I think that if you can get the mortgage without worrying about your loans, I would go that route since they are not currently affecting your credit score. If they are still lingering on other reports, then you would have to try to rehab them first. If they will affect you, then I would reach out to the service provider who is holding the defaulted loans and ask them to clarify how the loan forgiveness affects your case and what steps you would need to take to get it.
Edit to Add: It says that loans will not be reported delinquent if rehabbing, but would be reported as current then? I find it hard to believe that they would not report at all and then all of a sudden be there.
@teekay629 this is great. I appreciate your hands on experiences! At first when I applied for my very first mortgage via FHA due to at the time my scores weren't as high as they are now. When the lender ran my prequalify for FHA, that is when they told me I came up on the CAIVRS due to student loans. I had honestly forgotten all about them as they occured back in 2000 and haven't been on my credit reports in so long. That was then it was suggested I could apply for a conventional mortgage bc that doesn't require student loans to be paid back in order to be approved. I was prequalified for $180K mortgage and have down payment assistance available too. Alas, in this market I have yet to find a home close to that and so for now I am chilling until I have to reapply since it has been over 180 days. But like you said, that I was prequaled and the student loans did not come up is a good thing.
I agree with you on how they will or may report. That made no sense to me considering they are over 20 years old and haven't been reporting for so long. Even if they were current, they are still loans from 2000.
For me it is like the age old question on what came first the chicken or the egg. What should I do next for a step? Wait and hopefully be one that gets the full 20K, have that knocked down to <4K then work out a payment plan but work on finding a house first? Or start the rehab or consolidation now so that any months are adding up before repayment and then have the balance knocked down after forgiveness? But then that adds the new tradelines and amounts at high balance while I am trying to get preapproved for a mortgage, etc. Ugh. Maybe instead of blood, gore and terrible smells I should have gone the money numbers and financial career route. This crap is for the birds!!!
Starting Score: 461
@Gidgetmom wrote:
@IamWesty12 wrote:
@Gidgetmom wrote:Due to the American Rescue Plan any student loan forgiveness is not considered taxable income through 2025 (at least this is my understanding of it).
I believe your best bet is to start rehabilitating the loans out of default status. When I rehabilitated my loans in 2015, I had to pay, I think, 9 months at $68 per month to start. Near the end of the 9 months, the loans were picked up by a federal loan service and my monthly payments jumped to $280 per month on a ten year plan. With the payment pause, you may not have to pay anything monthly until payments resume in January (don't hold me to that...I'm not sure how the rehabilitation will work with the current Covid policies in place).
I would start by contacting whoever holds your loans now and ask how to go about rehabilitating them. I found this article which may help (or just muddy the waters more 🤓)
https://fsapartners.ed.gov/sites/default/files/2022-08/FreshStartFactSheet.pdf
@Gidgetmom thank you for your response, I appreciate it greatly! If I rehab these loans, with interest to date my balance is $23K, I do understand that for ~9 months I pay a set amount and after that they are considered in good standing and then so on and so forth for the 10 year payment plan. My question is, say I do this. How does the new forgiveness program altar this if I am in fact eligible to receive the full $20K in relief (I had PELL grants and my income for a single mom of 3 is w/in the guidelines) If I consolidate/rehab these loans and move forward, say when they issue out the forgiveness will they just take the $20k and subtract it from the balance of the now consolidated loans and then I have whatever monthly payment for the much lower amount? I am thinking if I do consolidate/rehab and get back on a good footing then I get the full $20K the balance would then roughly be under 4K because it would only be interest left. I know I never ask a simple small question. I just want to make sure I am not offsetting one problem by creating another one. Also these loans are all from the year 2000 and have long since been off my credit reports. What happens if I consolidate these 20 year old student loans? Will it effect my credit reports, will it add these tradelines back onto my credit reports dating back 20+ years? Again, my ultimate goal is being able to buy my first home for children and myself. Immediately after being able to become a homebuyer, my next goal would be in continuing on my credit journey that I have worked so hard for. I find myself apologizing again for all these scenarios, but as you can tell, advice is very welcoming to me!!!
From the article I posted here...
"Due to the Fair Credit Reporting Act, loans that have been delinquent for more than seven years generally do not appear on credit reports produced by credit reporting agencies. To ensure the maximum opportunity for borrowers with eligible defaulted federal student loans to get a fresh start, ED will
• delete reporting about loans that have been delinquent for more than seven years, even if the borrower enrolls in a repayment plan through the Fresh Start initiative;"
I read this as the loans will not reappear on your credit report even while in repayment. At the end of the article it mentions the steps you need to take to participate in the Fresh Start initiative. Even if they do show up after rehabilitation, they will be in a positive status and adding to your overall age of credit history. The only "ding" (and I can't really call it an issue as my scores have rebounded into the 800's) I get on my reports is "balance compared to original loan". My loans are from 1992 and I had been in and out repayment/default until 2015. I was lucky to get them rehabilitated, as I had started the rehabilation process prior but never saw it to completion. The loans help with my average age of credit and my 100% on time payment.
If you are eligible for the $20,000 forgiveness, I would think it's deducted from your total and you will still be responsible for the balance. But, the balance could be paid through an IDR and have really low payments or none at all; or, you may even be able to get balance forgiven under PSLF. In order to receive PSL forgiveness, everything I've read say the loans have to rehabilitated to qualify.
@Gidgetmom this is very helpful, thank you so much. I was thinking the same thing if it went down that way and I only had the interest left to pay. That payment would be managable at least. I am so appreciative of all the advice and information you guys ALWAYS give on her. You are all a godsend!!!
@Gidgetmom wrote:Another thing to consider...if you do get the forgiveness and left with $4,000 owing...will that forgiveness be considered a "payment" and bring it back to your reports as $4,000 defaulted one year after the end of the payment pause when they start reporting defaults again?
If it was me, just my opinion, I would go for the fresh start initiative. No matter how it shakes out, you will be better off with those loans in your past and as a positive trade line if they ever do show up on your reports. As it stands now...you still owe the money and it will always haunt you, one way or another.
@Gidgetmom ok, I am going to tackle this in the morning after a 5 hour energy shot and hopefully a good nights sleep 
@IamWesty12 fyi they just announced that you should be able to get the forgiveness before the covid pause expires - if your income automatically makes you eligible you should see the reduction by novmeber - if you need to apply the appliation is in october and you will see a reduction 6 weeks after the app.
@mfinsmi1 wrote:@IamWesty12 fyi they just announced that you should be able to get the forgiveness before the covid pause expires - if your income automatically makes you eligible you should see the reduction by novmeber - if you need to apply the appliation is in october and you will see a reduction 6 weeks after the app.
@mfinsmi1 WOWZA! I did not hear that today. All I could see all over the news was the other side saying they will shoot down the plan. So if this thing is a go then sounds like by my income alone I will see 10K, plus having been one that did receive PELL grants then that should make it a double, yes??? I literally slept my brain off last night, honestly, how do y'all get so smart over these things? I am so grateful that you guys are so knowledgable and always share your expertise and advice on here daily. Once this is hopefully over, then maybe I can find a home w/ the market. Then, honestly, I will so happy to come on here daily and just read, reply and post TY again to @mfinsmi1 @teekay629 @Gidgetmom @GatoradeZeroGuy seriously, thank you!