Loans Pulled Back From Collections

[Anonymous]

Hi everyone, I’d appreciate any insight. I have student loans from 12 years ago that had been in default with a collection agency. They have a wage garnishment in place which I have not attempted to stop because I wanted to get them paid. They are not on my credit report and I didn’t want to risk them showing up. Yesterday I got an email saying that they have pulled the account back from collections. Anyone know what will happen to the garnishment? I have it down to under 5,000. If I pay it off will they pop back up on my credit report?

[Anonymous]

Since federal loans never go away and you've actively been making payments on it, it can pop back up on your credit report at any time if I'm not mistaken. As for it being it being pulled back from collections, what is the wording of the email? Did you complete rehab or consolidation? Or is it just in a position where it can be assigned to a different servicer.
It's my impression that the garnishment would not stop until you've fully repaid the debt. If it's being paid to the government, not the collection agency, then I don't see how the garnishment would become invalid. However, it would probably be best to contact the Dept of Education and find out for sure. You could share probably call the number on the form you got notifying you that they were going to garnish you.
You could pay it off but I think the general consensus is to have the loan returned to a servicer by rehabbing, then pay it off. It will take a while, but after those months of payments are up it will return to your credit report with the original loan dates. It sounds like this would revive a tradeline(s) with a good amount of age on it and no lates.

[Anonymous]

The exact wording in the email is “The U.S. Department of Education recently recalled your defaulted student loan account from the private collection agency that has been servicing it, GC Services.”
I was hoping the garnishment would continue as the last $5,000 would be paid off in 6 months and the way it was going nothing was showing on my credit. My concern is that if the garnishment stops and I have to make payments it will pop back up on my credit report.
If you do the rehab does the loan show up as bad for a while until the rehab is complete? Once the rehab is done it all goes positive?

[Anonymous]

Information on defaulting is not my strong suit. Someone else can probably help you better. Student Loan Hero is also a great resource.

From the wording of the email I would guess that they just took back the loan and are going to reassign it to another collection agency. When will that happen? It varies. It should update on the NSLDS website or you could always call Dept of Education.
Your loan is still in default though. To get out of default it requires you to rehab or consolidate. Given that you don't have the 9-10 months to rehab, I would say now would be a good time to probably just pay off the loan. There is no guarantee that whatever collection agency it is placed with after it is reassigned will not report.
The other option is you could consolidate right now. This would not remove the default, but it's not showing up for you anyway. There is no need to make voluntary payments first, although if you don't you'll be stuck with the IDR plans. Again, since you want to pay off the loan, it won't matter. It will initially show up as a 100% utilization new loan but after you pay it off you'll have a positive closed tradeline on your credit report for 10(?) Years. It all depends on what your credit report looks like now to figure out if you could benefit.
If you don't do either of the above options, I don't know if the garnishment stops. Contact D of Ed.
No matter what you choose, sounds like you'll be doing great having dealt with the debt. Congrats on paying off your loans soon. 🙂

[calyx]

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@Anonymous wrote:
Information on defaulting is not my strong suit. Someone else can probably help you better. Student Loan Hero is also a great resource.

From the wording of the email I would guess that they just took back the loan and are going to reassign it to another collection agency. When will that happen? It varies. It should update on the NSLDS website or you could always call Dept of Education.
Your loan is still in default though. To get out of default it requires you to rehab or consolidate. Given that you don't have the 9-10 months to rehab, I would say now would be a good time to probably just pay off the loan. There is no guarantee that whatever collection agency it is placed with after it is reassigned will not report.
The other option is you could consolidate right now. This would not remove the default, but it's not showing up for you anyway. There is no need to make voluntary payments first, although if you don't you'll be stuck with the IDR plans. Again, since you want to pay off the loan, it won't matter. It will initially show up as a 100% utilization new loan but after you pay it off you'll have a positive closed tradeline on your credit report for 10(?) Years. It all depends on what your credit report looks like now to figure out if you could benefit.
If you don't do either of the above options, I don't know if the garnishment stops. Contact D of Ed.
No matter what you choose, sounds like you'll be doing great having dealt with the debt. Congrats on paying off your loans soon. 🙂

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Hi, DefaultQueen here (lol, I mean, I should be ashamed),

I would do what Sabii is suggesting and either pay it off lump before it appears on your reports or go through consolidation.
Garnishment is ALSO taking on a fee, so you would actually spend less paying it off, even if consolidated.
If you do consolidate, it's a (new) positive tradeline, and there's nothing stopping you from paying it off early (either as a lump or just with extra/larger payments).
I'm currently on track to pay my own off in 3 years by tripling my payments, even though I'm on an IDR plan, there's no early payment penalty, nothing bad happening, but more importantly  no extra collection fees for garnishment.