Paid off defaulted student loans - what’s next?

[Anonymous]

Hey all, 

I recently paid my defaulted student loans off in full ($11,000) and I'm not sure what to expect credit wise. To my understanding if you rehab the loans to good standing the default status and late payments are removed (maybe?) What are the credit implications for full payment? Will the negative status remain and I just won't have a balance? Will the late payments be taken off credit history and they will just show as in good standing? 

Any advice is appreciated  

[Anonymous]

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@Anonymous wrote:

Hey all, 

I recently paid my defaulted student loans off in full ($11,000) and I'm not sure what to expect credit wise. To my understanding if you rehab the loans to good standing the default status and late payments are removed (maybe?) What are the credit implications for full payment? Will the negative status remain and I just won't have a balance? Will the late payments be taken off credit history and they will just show as in good standing? 

Any advice is appreciated  

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I would have, personally, gone the rehab route so the derogatory accounts would have been removed, possibly had the lates removed (not guaranteed), and had "new" TLs placed on with a positive payment history back dated to the origination of the loan(s), and at that point paid them off. What is done is done, though.

I could not say if simply paying them off will give a huge score boost in itself, as all the derog accounts stay. Installment loans are not figured into revolving util, so it will not decrease that and in turn give a score boost. So here is to hoping for a positive outcome and a score increase, anyway!

Please let us know what happens!

[calyx]

I agree with @Anonymous 

When I paid off my defaulted student loans, it did help, in that the negatives could now "age"
Unfortunately, defaulting is a pretty major derogatory, so it only helped a little bit.

You'll have to wait until 7 years from the date of default before you see them drop off if you do nothing.
You *COULD* write goodwill letters to the servicer asking them to remove their tradeline.   They probably won't, but there's an outside chance they might.    Read up on goodwill in the Rebuilding forum for some good ideas.    The fact that you paid the lines is a huge boost in your favor, but won't guarantee anything.

[Anonymous]

Dang, I actually had completed a rehab anyways just needed to verify income, but had the means to pay them off so I did that instead. I don't really understand why rehabbing the loan and going back to paying monthly would have a greater affect then just paying them off entirely . I'll definitely try a goodwill letter though and see if it gets me anywhere. I'll let you know the outcome! 

[Anonymous]

Ok so I just called FSA directly and explained I paid the loans off in full and would like to know if late payments would be removed, she informed me that FSA directly does not report late payments, only good standing or bad standing, and the collection company is actually the one that reports the late payments. She said she is sending me a document to have the late payments removed from my credit file, and can provide me with a temporary letter explaining the balance has been cleared until it updates on my credit report o_O 

[Anonymous]

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@Anonymous wrote:

Dang, I actually had completed a rehab anyways just needed to verify income, but had the means to pay them off so I did that instead. I don't really understand why rehabbing the loan and going back to paying monthly would have a greater affect then just paying them off entirely . I'll definitely try a goodwill letter though and see if it gets me anywhere. I'll let you know the outcome! 

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i know it sux, you just have to play their game of wait 9 months, even if you can do it now.

I was not saying you had to go back to regular payments, just complete the rehab and let the bad accounts come off and "new" old accounts show up on the CRs for the backdated positive payment history from the date when the loans originated and then you could have paid them off after they reported to the CRs, just to get the most positive scoring gains. Old tradelines with lengthy positive payment history definitely boost scores a bit more than just paying them off, as that is the most beneficial gain from amy type of baddie one can get.

I hope you see some positive results with the lates removed.

[Anonymous]

Ah ok I gotcha, I was actually under the impression you weren't able to pay student loans in good standing in full, I actually called FSA before I did the pay off and asked if rehabbing or paying in full would be more beneficial to my credit and they said both options would have the same result as far as getting the accounts into good standing, time will tell! Lol 

[Anonymous]

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@Anonymous wrote:

Ah ok I gotcha, I was actually under the impression you weren't able to pay student loans in good standing in full, I actually called FSA before I did the pay off and asked if rehabbing or paying in full would be more beneficial to my credit and they said both options would have the same result as far as getting the accounts into good standing, time will tell! Lol 

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Of course you can pay a loan in full whenever you want. It is your money amd they will gladly take it, good or bad standing!

I feel lile many of the reps are not very well educated on the credit aspects of loans, they get a script and read it amd the rest is mere guessing. Whatever it will take to get you to pay and probably the more money, the better!

Please keep us posted on what happens woth those lates/accounts and how it affects your scores!

[Anonymous]

Ah crap, well what's done is done : /. I may give the collection company a call though and see what they can do, I don't really agree with what FSA told me with disputing the lates , they are legitimate lates and that just feels unethical. I did actually successfully complete the rehab before paying them off, just had to submit proof of income. Admittedly my income went from about 85k to 160k (around the 5th month) during the rehab which when I informed the collection company of this when they were asking for proof of income they said I would probably have to start the rehab all over again since what I was paying before was based on the lower income. Maybe there's some way I can still get them to remove the lates for me since I did technically complete the rehab? Who knows lol I've seen so much conflicting information regarding this... 

[Anonymous]

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@Anonymous wrote:

Ah crap, well what's done is done : /. I may give the collection company a call though and see what they can do, I don't really agree with what FSA told me with disputing the lates , they are legitimate lates and that just feels unethical. I did actually successfully complete the rehab before paying them off, just had to submit proof of income. Admittedly my income went from about 85k to 160k (around the 5th month) during the rehab which when I informed the collection company of this when they were asking for proof of income they said I would probably have to start the rehab all over again since what I was paying before was based on the lower income. Maybe there's some way I can still get them to remove the lates for me since I did technically complete the rehab? Who knows lol I've seen so much conflicting information regarding this... 

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I did not realized you completed rehab!

That is crazy!

They wanted POI after the fact? That is so strange! Between me and my SO we are working with 4 different CAs for rehabs. All but 1 wanted POI upfront.

I did back door with one and set up rehab online with them and they did not require POI, but they did when I called in.

Now I am terrified that they will want POI after the rehab is done!

2 of the 3 servicers were being absomute pains to set up the rehab because I have "conplicated" income. I set up 1 no problem, the second through online platform (that I am now nervous about since you mentioned it and I do *not* want to start over!), and the 3rd we could never set up because they have been so difficult regarding my income!

Well I would think they hold the keys because they are the servicer, but it is completely unfair to waste 9 months of your time for nothing!

I don't see why you would jave had to start over, but rather just change the amount of the monthly payments. How did they let you complete the rehab then? I was certain once you set it up you did not need to report income increases, only decreases if you needed a lower payment? I would have let it be until it finished. Since they mever got officiappy finished or transferred, I am not sure that means you truly completed the rehab.

Please keep us posted!