Paying Off Fed Student Loan in Collections/Default with w/ National Credit Services (NCS)

[CaroleBaskinBB]

I defaulted on my federal student loan almost 7 years ago and for the last couple of years have been making monthly payments to NCS (collection agency for Dept of Education).  I've looked at 2 of my 3 credit reports recently (coudn't gain access to Equifax) and they do not show my default/loan being in collections, nor do they mention the loan.  Despite having this on my record at some point, my credit score is around 750.  My reports do show a credit card acct that my husband made me an authorized user for.  This was his acct before we got married and I don't use it- to my chagrin, he has an $11k balance on it and has no way of substantially paying this off.  Our finances are not combined- he is salaried and pays the mortgage, I'm a real estate agent and make larger chunks of money.  I very much want to improve my, and my husband's, credit score.

I am finally in a position to pay off the student loan of nearly $15k in a lump sum settlement and put this behind me.  I've read that paying this off via the Dept of Education, instead of through National Credit Services, can have a faster and more positive impact on your credit. 

Is it more advantageous to pay this off through the Dept of Education, NCS, or does it matter?  If this isn't on my credit report, can this come back to haunt me if I don't pay it off or if I take a long time to pay it off?  Since I don't think this is on my credit reports, will paying off this debt affect my credit score?

Paying this off is one of my goals for this year, but I also have a lot of dental work looming.  If the student loan default isn't on my credit report, does it make sense to pay that off before tackling my next goal?  Or does it make more sense to pay off my husband's credit card balance?

[dragontears]

If it is not on your reports it doesn't matter who you pay since the payoff is not going to be reported 

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@CaroleBaskinBB wrote:

I defaulted on my federal student loan almost 7 years ago and for the last couple of years have been making monthly payments to NCS (collection agency for Dept of Education).  I've looked at 2 of my 3 credit reports recently (coudn't gain access to Equifax) and they do not show my default/loan being in collections, nor do they mention the loan.  Despite having this on my record at some point, my credit score is around 750.  I very much want to improve my credit score.

I am finally in a position to pay off nearly $15k in a lump sum settlement and put this behind me.  I've read that paying this off via the Dept of Education, instead of through National Credit Services, can have a faster and more positive impact on your credit. 

Is it more advantageous to pay this off through the Dept of Education, NCS, or does it matter?  If this isn't on my credit report, can this come back to haunt me if I don't pay it off or if I take a long time to pay it off?  Since I don't think this is on my credit reports, will paying off this debt affect my credit score?

Paying this off is one of my goals for this year, but I also have a lot of dental work looming.  If the student loan default isn't on my credit report, does it make sense to pay that off before tackling my next goal?

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[CaroleBaskinBB]

Thanks.  Should I even pay it off?  I've since edited my post to explain how my husband's $11k credit card balance IS on my credit report.

[Anonymous]

Federal student loan debt does *not* have a SOL and can always come back to haunt. Including popping up on your CRs, as they are held to different standards. I'd pay it and let it stay off your CR rather wait til it pops back up, they garnish you, your tax returns, or whatever else they can think of doing to get their money back. This is the government, after all.

Good luck and be glad it isn't on your credit!

You could always consider rehabbing the loans and then once done have a nice old TL on your CR only reporting positive info on there to boost and diversify your credit. There are a couple ways to tackle this! Do what you think is best for you!

[dragontears]

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@CaroleBaskinBB wrote:

Thanks.  Should I even pay it off?  I've since edited my post to explain how my husband's $11k credit card balance IS on my credit report.

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Eventually you have to pay it off since federal student loans don't go away. If you are in a payment plan and they are not taking your tax return I would focus more on your current reporting debt (obviously keep making your payments on the loans). You can throw extra money at it when you get the chance. This is assuming that the interest rate is not really high. 

You didn't say what the limit of the card with the 11k balance but it might be a really good idea to have him remove you as an AU.

[Anonymous]

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@dragontears wrote:

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@CaroleBaskinBB wrote:

Thanks.  Should I even pay it off?  I've since edited my post to explain how my husband's $11k credit card balance IS on my credit report.

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Eventually you have to pay it off since federal student loans don't go away. If you are in a payment plan and they are not taking your tax return I would focus more on your current reporting debt (obviously keep making your payments on the loans). You can throw extra money at it when you get the chance. This is assuming that the interest rate is not really high. 

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 She mentioned they are defaulted, so she definitely is not in a payment plan. They prob fell off her CR at the 7 year mark, but they can come back at literally any given moment, as far as I am aware. Apparently they can "legally" report until it isnpaid off entirely, but that doesn't seem to be truly in oractice with the 3Bs...

[CaroleBaskinBB]

My husband's credit card limit is I think around $15k, so the utilization is terrible for both of us. His credit score is 700 and I want both of our scores improved. 

Are there ramifications for me being removed as an AU?  I don't have much credit and recently got a credit card.  Initially, me being added as an AU to his card helped me.  I don't know my student loan interest rate but it's still with the collection agency and in the past couple years of paying it, the balance and the settlements they are offering have only come down a little bit. 

[dragontears]

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@CaroleBaskinBB wrote:

My husband's credit card limit is I think around $15k, so the utilization is terrible for both of us. His credit score is 700 and I want both of our scores improved. 

Are there ramifications for me being removed as an AU?  I don't have much credit and recently got a credit card.  Initially, me being added as an AU to his card helped me.  I don't know my student loan interest rate but it's still with the collection agency and in the past couple years of paying it, the balance and the settlements they are offering have only come down a little bit. 

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You would have to list every open account (date opened, balance and credit limit) on your report for anyone to estimate what the impact would be. (Which might be a question to post in the understanding scoring forum as there is a lot more traffic there)

Call the collection company and ask what interest rate is. 

Have you rehab this loan in the past? If not rehabbing could help your score by giving you a nice old open positive account on your reports; my student loans are the anchor for my average age of accounts (I was actually nostalgic when I made the final payment lol).

[CaroleBaskinBB]

I will ask what the interest rate is.  I'm ashamed to say I allowed the loan to be defaulted for a long time before it went to collections, so I don't know that it can be rehabilitated.

[dragontears]

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@CaroleBaskinBB wrote:

I will ask what the interest rate is.  I'm ashamed to say I allowed the loan to be defaulted for a long time before it went to collections, so I don't know that it can be rehabilitated.

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It doesn't hurt to ask about rehab, I am not up to date on the current requirements but it use to be as long as you had not rehab the loans previously you could qualify.