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I have a Federal student loan that I defaulted on. It has been "managed" by a slew of different collection companies over the past 10 years. For the past 6 years they have garnished my income tax refunds - both state & federal.
I have not filed the past 2 years - knowing that I will not deal with any tax penalties -because I don't want them to take my substantial refunds. I'd rather have that lump sum for other important things & repay the remainder of the student loans monthly. In order to do so, I would like to call the current collection company & try to establish a payment plan & get them to lift the Tax refund garnishing. Is this possible?
I realize that there is no SoL for repayment, but it seems there is an SoL for credit reporting in NY - which is 7.5years. The loan was on my report a few years ago, but since has been deleted - I assumed it reach the SoL.
If I establish this payment plan will the loan be reported again?
Thanks for reading!
From an article I just read it says, "...The other change has to do with wage garnishment. Under federal law, the government has the power to take a slice of your wages to repay a delinquent student loan without taking you to court. Under the new regulations, involuntary wage garnishment will be suspended after five of the nine required rehabilitation payments are made on time."
From what I've researched here it seems rehabbing your loan will result in positive tradelines on your credit reports.
As far as not filing your income tax returns. If you would be getting refunds for the years you haven't filed be aware that you have 3 years from the due date of that years income tax return to file and receive a refund.
You are fine to do just as you've described with your taxes, as long as you file within the 3 year limit. Given that you're already 2 years into that, I'd say now is the time to get your rehab set up. There are some good threads on here about how rehab interacts with your tax returns being seized to pay for delinquent student loans - including the number to call to verify that hold has been lifted.
Log on to the National Student Loan Data System (nslds.ed.gov) and make sure you know the status and the CA handling all of your loans. Then, call the CA(s) and request rehab, they should set up a reasonable monthly payment for 9 months. Once rehab is done, you'll get new, positive tradelines for each loan back-dated to when the loans originally opened. The CAs will also remove all of their reporting. Since your original defaulted tradelines seem to have already aged off, this should give you a squeaky clean credit report - and possibly a very nice score boost.
The worst that could happen in terms of updated report during the rehab is that your CA reports, but that would be removed after the 9 months, so it will have a very short-term impact.
I am long into what you descirbed by a few years. I just continued my post ahead of this and will update. Mine are long fallen off and just started rehab. I will say this about them takling the tax refunds worked well for me. It payed back money I had to payback reguardless. Made my total amount owed amount less by 20% and to boot returned my account to MYEDDEBT from a debt collection agency'S for the past 4 or 5 years with the added bonus of removing all collection costs and added penalty fees : ) "almost $1000" in collection fees erased from total due. Yea doggggggy
Dealing with MEEDDEBT/Default resolution group is a (world better) then the Collection Agrencies they use. MEEDBEDT gives better default payment amounts then the CA in the REHAB program.
Thank you Dman23, SCF, MidnightJester. I appreciate all of your helpful responses. I just finished organizing my info & game plan. I have the NSLDS info & the latest Collection Agency collection letter. The remainder I owe is 3167.95 to the CA. The NSLDS total outstanding (with interest) is 2706.00 - that means I'm paying 461.95 in CA fees to settle my entire debt. I can live with that fee. The loans all defaulted 2006. This explains why, more than 7.5 years later, there is no evidence of the loans on my credit reports. Having my tax refunds taken helped me pay off the loans - for that I 'm happy. I have not filed my 2012 or 2013 taxes yet. I have completed them & I am expecting more of a refund than the remainder I owe on the loan. That being the case, I will just let them seize the rest of their money in one final shot rather than setting up a payment plan. Its easier & faster. I can complete that in under (3)months, rather than (9)months plus.
As far as I understand, making the payment this way is not going to help or hurt me with credit reporting as the loan has aged off my report anyway. Agreed?
Although the original loan has fallen off your report - the collection agency is allowed to report a collection on your report. If they haven't done so up to this point, I'm not sure what would motivate them to suddenly report, but the possibility is there. The loan also might be transferred to another CA at any time with a different policy.
Rehab also results in clean tradeline(s) backdated to the original open date of the loan being placed on your report. That can be a substantial boost depending on the rest of your credit profile. If you don't need the credit benefits though, it may not be worth waiting the nine months.
I do need the credit boost. I misunderstood that the CA will report the clean tradelines back to the original date. Thats well worth making (9)months of payments & waiting to file my taxes until that is complete. Afterall, they cannot seize from my taxes what is not there. I will be calling the CA today & will post the results. Thanks SCF!
Just to clarify - it's not actually the CA that reports the new tradelines. Once you complete the nine payments for rehab, the CA will transfer your loan back to a regular servicer. Once the transfer is completed, you will make payments to the servicer and they will report a new, clean tradeline backdated to the original open date of the loan or loans.
Update:
I called the debt collector, Performant. They were very nice & easy to deal with. I worked with a lady who helped me to fill out the application to qualify. I have to make a $5.00 payment per month for the next 9 months. FYI: They allow you to pick the day your payment is automatically withdrawn (you can choose to pay manually per month also). The benefit to choosing the day is that they take the first payment over the phone to get the ball rolling. So, since I made my first over the phone payment mid-month, I purposely chose the first of the month for each payment thereafter. Not a huge deal, but it shaved a little time off the whole 9 month payment plan.
End result, they take $5 from my account 9 times over 9 months. At that point, they transfer the loan back to the original lender with a clean tradeline dating back to the original date. It takes about 60days, according to the performant rep, after the 9 months to complete to transfer back to the original lender. At that time you can, if the lender allows you, establish a new payment plan to deal with the balance - or in my case (as my choice), pay the whole sum all at once. Performant will allow you to pay off the loan and skip the 9 month deal - but you LOSE all the repaired tradeline - so don't do this.
Once the 9 months passes and the loan is transfered, they also lift the seizure of your tax returns.
Once again, thanks to everyone for your help. All of your advice was on the money & this update confirms that.