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My Student Loan Rehab Experience

Established Contributor

My Student Loan Rehab Experience

I defaulted on a Perkins loan in 2008 from the university I attended over 10 years ago, and recently went through the rehab process. Initially, the loan was sent to collections in 2009 and I agreed to pay $22/month to get the CA to stop harassing me at work. Little did I know, the $22 didn't even cover the monthly interest on the loan - and the CA added over 40% in fees and past due interest to the account. A roughly $5k loan balance quickly turned into over $7,500.


After beginning my credit repair journey last year, I decided to rehab the loan. I owed around $1k in past due interest, and the school decided allowed me the chance to rehab due to some unsavory collection practices from the CA. I paid roughly $110 per month for 9 months from April until December 2012. On December 21st, I made my last payment. Due to the holidays, I couldn't get in touch with anyone to process the rehab until January 7th - but that once I did the process went very quickly. Once the rehab was processed, I received a ScoreWatch update on January 10th that my score had changed. I pulled my USAA credit report and found that all of the negative information on the tradeline had been replaced with "OK", and the comments changed from "collection" to "pays as agreed".


That being said, I only saw a 4 point increase in my EQ FICO score from ScoreWatch. As far as the rest of the loan, the 10-year clock was reset when I started paying the school again. Since I made 9 consecutive payments plus my normal January payment, I know have 112 payments remaining. The amount of my payments is the same as it was before I defaulted on the loan. All I paid during the rehab was the past due interest, and when the school pulled the loan back from the CA all of the fees were removed from the loan. The fees alone were roughly $2k, and now my loan balance is back below $5k as it was before I defaulted.


For anyone considering whether or not this is the right thing to do - this is the right thing to do. Student loans (generally) do not go away. Call your school and talk to the staff regarding your situation and see if they can help. Even though I've already paid on this loan for over 6 years (off and on with deferment) and feel like I haven't paid much of the original balance off, I feel a whole lot better being in this situation and it's like I've been given a second chance. It may be tough doing the rehab and waiting to see what happens with your specific situation, but you will feel relieved once you're back where you used to be.

AMEX PRG - NPSL I AMEX Everyday Preferred - $34.8k I Capital One Venture - $20k I Chase Sapphire Preferred - $25.5k I Chase Southwest Rapid Rewards Premier - $20.7k I Barclay Arrival + - $10k I Capital One Quicksilver - $10k I NFCU Flagship Rewards Visa Signature - $15k I NASA FCU - $10k I Texell FCU Visa - $5k I Chase Freedom - $9.9k I Citi Double Cash - $7.8k I Discover IT - $5k I NFCU CLOC - $15k I Total Unsecured Credit - $188,700

EQ FICO - 714 (5/24/16) I TU FICO - 772 (5/24/16) I EX FICO - 770 (5/24/16)
Message 1 of 4
Established Member

Re: My Student Loan Rehab Experience

Rehabs are only generally possible for federal student loans. I need to check if the PAYE plan applies for Perkins as well. That being said, student loans are impossible to get rid of. Period. The only way you can get out of paying one is if you are dead or homeless and living under a bridge (only way to pass the Brunners test).

Message 2 of 4
Frequent Contributor

Re: My Student Loan Rehab Experience

Perkins is most DEFINTATELY  a federal loan!


The PAYE plan would have nothing to do with whether a Perkins is eligible for rehab.

Ex-Financial Aid Officer

Ex-Student Loan Collector
Message 3 of 4
Established Contributor

Re: My Student Loan Rehab Experience

This is a great story with very optimal outcome. You are quite lucky. Congrats.

Message 4 of 4