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Rehab Defaulted Student Loan Hurt Credit Report?

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Rehab Defaulted Student Loan Hurt Credit Report?

I have several very old defaulted Federal Student Loans that dropped off from my credit report over a decade ago; having been removed from my credit report completely after appearing for 7 years as negative trade lines. In the time since then, my wages had been garnished a few times, and that money was used toward paying down the balances. Now that I'm more financially secure, I want to contact the Federal Government about rehabilitating the loans and working toward getting them finally completely paid off. My wages are not currently being garnished, and I'd like to avoid that again, and just work out a payment plan...

My questions are: will they be open to not garnishing wages again / stop garnishment if I agree to a payment plan?

Also, more importantly, will me starting up payments on the loans again, cause them to appear on my credit report again, thereby negatively impacting my scores and showing as negative trade lines of defaulted loans and increased debt...for the next 7 years?

Help!!!!!

15 REPLIES 15
Established Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Student loans are the gift that keeps on giving. They never go away and just because they aren't there now doesn't mean they won't pop up unexpectedly.

As for rehab, if you call to set up a payment plan, that stops all adverse action. You would not be garnished while following a repayment plan voluntarily.
You'll also feel better knowing it's not hanging over your head.
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Message 2 of 16
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Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?


@XtraCredit wrote:
Student loans are the gift that keeps on giving. They never go away and just because they aren't there now doesn't mean they won't pop up unexpectedly.

 

Thanks for the replies...these loans have not reported on my credit reports for well over a decade and I'd hate for them to pop up again now due to repayment, just as I'm getting my score back up to good standing...anyone know if they will?

Message 3 of 16
Established Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Have you received any notices? Do you know the balances? HOW do you know the balance?
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Current Score: EX 714 TU 718 EQ 713 (EQ9 735)
Goal Scores: 750


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Message 4 of 16
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Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?


@XtraCredit wrote:
Have you received any notices? Do you know the balances? HOW do you know the balance?

Notices have always continued to come, but I always ignored them as I did not have the funds to pay them. Today, I looked them up on the Federal Student Aid Website, and saw all the loans listed and their balances.

Message 5 of 16
Established Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Ok. So they haven't 'disappeared '.
Where are you getting tour credit reports and are you pulling all three? They may actually be showing up.
Starting Score: EX 641 TU 631 EQ 669
Current Score: EX 714 TU 718 EQ 713 (EQ9 735)
Goal Scores: 750


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Message 6 of 16
Frequent Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?


@XtraCredit wrote:
Ok. So they haven't 'disappeared '.
Where are you getting tour credit reports and are you pulling all three? They may actually be showing up.

They disapeared from my credit reports. Yes I am monitoring all 3 direct from Fico. They dropped off my credit reports years ago, as previously stated after 7 years of reporting  as defaluting. While they were on there, my credit score tanked, obviously, but then when they dropped from my reports after 7 years, my scores shot up. My reports have had no sign of them ever since.

Message 7 of 16
Established Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

Hmmm... I got nothin' 🤷🏽‍♀️
Starting Score: EX 641 TU 631 EQ 669
Current Score: EX 714 TU 718 EQ 713 (EQ9 735)
Goal Scores: 750


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Message 8 of 16
Established Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?

The unfortunate thing about federal loans is that servicers and collection agencies rarely tell people about their options when it comes to student loans for those who are unable to afford the plan they are put on (often still on standard repayment). At any point they could have informed you about the plans that take your income into account. I'm only saying this because while your income is steady and your goal right now is to pay down your loan, if you ever find yourself in the same or similar financial position, you have options. You might read up on the income-driven repayment plans, especially Income-based repayment and REPAYE/ PAYE. They recertify annually, so being on them can be temporary. They have interest subsidy benefits and will count as positive payments.
That aside, I think it's still in your benefit that you contact the Dept of Education and try to pay this loan off. You don't want it to get sent to another collection agency that will choose to report to the CBs. Given that the loan isn't paid off, I think this is still possible. Federal loans are unique.
If they start reporting, you'll have far fewer options. You don't have enough payments left for rehab and consolidation won't remove the default.
If it gets reassigned and they try to garnish you, in order to stop it you'll have to make voluntary payments in the amount (percentage) that is listed on the form, within the deadline. Hopefully it doesn't come to that.
Any questions?



Message 9 of 16
Frequent Contributor

Re: Will Rehabbing Old Defaulted Fed Student Loan Damage Credit Report?


@Sabii wrote:
 You might read up on the income-driven repayment plans, especially Income-based repayment and REPAYE/ PAYE. They recertify annually, so being on them can be temporary. They have interest subsidy benefits and will count as positive payments.
That aside, I think it's still in your benefit that you contact the Dept of Education and try to pay this loan off. You don't want it to get sent to another collection agency that will choose to report to the CBs. Given that the loan isn't paid off, I think this is still possible. Federal loans are unique.
If they start reporting, you'll have far fewer options. You don't have enough payments left for rehab and consolidation won't remove the default.
If it gets reassigned and they try to garnish you, in order to stop it you'll have to make voluntary payments in the amount (percentage) that is listed on the form, within the deadline. Hopefully it doesn't come to that.
Any questions?

From the little I've recently seen on the income driven repayment, I think I want to try to avoid that since it will cause interest to just continue to baloon for a longer period of time, moreso than just trying to pay a higher monthly amount...any thoughts on whether my new payments would cause these loans to reappear on my credit reports, fresh, for a new 7 year period?

Message 10 of 16
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