Student Loan Rehabilitation (Expected credit score increase?)

[CreditWarrior21]

I think it is awesome that someone picked up your loans after rehab. My biggest fear is that in 6 months EDFund will still not have found lenders to pick up loans. And no one seems to know if there are lenders picking up loans or not.

[Anonymous]

Hello "Grad-With-Soon-to-be Stellar-Credit"!

I really appreciate you taking the time to respond and share your experience regarding rehabilitation. Congratulations on completing the program!! I'm very happy for you that you are now on your way to restoring your credit and hopefully soon purchasing a new car. Please do keep me updated. The US Dept of Ed also holds my loans. I am especially curious to hear whether the late payments that show on the credit reports under those tradelines are also removed in addition to the default status. Since payment history counts as a large percentage of our credits scores removing these late payments would make a significant impact. Removing the default status and hopefully the late payments will actually give me credit reports that will be blemish free. I am also curious to hear whether all of the tradelines that consistute your student loans will have the default status and late payments removed. For instance, on my credit reports I have essentially have three trade lines for my student loans which total $65,835 I'm a little confused about this. One tradeline says it's under the US Dept of Ed for a credit limit of $65,835 but it shows a recent balance of $0. Then the other two tradelines are under the US Dept of ED/FISL/SF and both total the $65,835 and do show the balances totalling the $65,000 plus. If your credit reports also show a similar scenario I'm curious to hear if the default status is removed from all three.

Just like you my student loans constitute 90% of my credit problems. Because of the default status on my student loans and hence low credit scores I had to resort to opening up three secured credit cards in order to try to establish some positive credit history. Many years ago I had closed every single one of my credit cards upon paying them all off and now realize that that was the wrong thing to do. I also paid in full a couple of medical collection bills and also realize that that was the wrong thing to do instead of asking for a payment for deletion in writing. Lessons learned of course after doing lots of research on how to improve ones credit scores. I am happy to say now though that opening up those three secured credit cards, keeping my balances on them very very low, not allowing any more mortgage loan companies nor any other third party to pull my credit scores, pulling my own credit scores, disputing some other inaccurate information on my credit reports, paying my balances on time every month, and waiting for time to just pass has increased my credit scores on average over a 100 points since January of this year. I now check my credit reports and scores on a daily basis. I wish I could do more to raise my credit limits which will probably raise my scores even more but because I have secured credit cards it means I would have to deposit a lot more money into each one. I did that with one card and increased my credit limit from $300 to $1,000 but there was no difference in my score. I guess the limits have to be higher for an increase to take place. Not sure what the magic number is though. It just says on my credit report analysis that one of the thing hurting my credit scores is that the limits on my credit cards are too low.

I thank you for sharing your experience. I also appreciate you offering to update us all on what the outcome is upon completing your rehabiliation program. I'm so thankful that this program even exists. It's kind of hard explaining it to each realtor and lender we meet with when we have to explain that the rehabiliation program I am in IS NOT one regarding substance or alcohol abuse dependency. I will take your advice and prepare that it might take a couple of months even after completing rehabiliation for the default status to be removed. Thank you and good luck to you!

[Anonymous]

Hello Istherehope,

I just found this interesting article on the net regarding student loan rehabiliation and that "hope" might be on the way especially for folks who have completed a student loan rehabiliation program but are still waiting for a lender to pick it up especially during this economy. The link and article are below:

http://www.studentloanborrowerassistance.org/2009/06/26/loan-rehabilitation-relief-finally-on-the-wa...

Loan Rehabilitation: Relief Finally On the Way

Congress passed a bill on June 23 that will provide much-needed relief for borrowers in default on their federal student loans.  President Obama is expected to sign the bill.

There are only a few ways for federal student loan borrowers to get out of default.  Loan cancellations or bankruptcy discharges are available only in limited circumstances.  However, many borrowers are able to get out of default and avoid the government’s extraordinary collection powers by rehabilitating or consolidating their loans.

Rehabilitation is not necessarily the magic solution that some lenders and guaranty agencies claim.  In many cases, consolidation is just as effective.  The main advantage to rehabilitation is that borrowers can get the default notations removed from their credit reports if they successfully rehabilitate their loans.  These FAQs provide information about the pros and cons of rehabilitation and consolidation.

The problem since last year is that rehabilitation has not been available for many borrowers.  The credit freeze meant that there were no longer many (or any) buyers wiling to purchase the rehabilitated loans.  The Department of Education insisted that the resale requirement could not be waived.

When there was just a hint last year that borrowers currently in school might not be able to get their loans, Congress and the Department acted right away.  There was no such urgency for loan defaulters.  Thousands of borrowers who had completed their required rehabilitation payments were stuck, unable to begin clearing up their credit and in some cases continuing to face collection actions.

Even though relief was slow in coming, the good news is that it is here.  The new bill allows guaranty agencies to sell rehabilitated federal loans to the Department of Education if they are unable to find buyers for those loans.

There are many to thank for this result.  The Obama Administration supported this change and Congress finally did the right thing as well.  The Congressional committee leaders, Senator Kennedy and Representative Miller, provided critical support.  During the long wait, some states, such as Illinois came up with their own solutions for borrowers in their states.

Although many guaranty agencies took advantage of borrowers during this difficult time, others tried to help.  For example, some agencies figured out ways to purchase the loans in-house.  The National Council of Higher Education Loan Programs stated in March 2009 that guaranty agencies would not offset state tax rebates of all borrowers who made the required rehabilitation payments and continued to make payments while waiting for a buyer to purchase their loans.  Other guaranty agencies spoke up for change.

We have a message for these guaranty agencies:  Act quickly to complete the rehabilitation process for your borrowers.  We will be watching.   We also urge borrowers to let us know your experiences.

[CreditWarrior21]

Thank you so much Chuckiss.

It's nice to read that help is on the way. I have 6 more payments to make so I have a while yet, but want my loans to be picked up! It's funny that all that stimulus money went out to help the corporations-but students with student loans are the people who got screwed in the end. It is definetely my fault I defaulted-but I am trying to correct that and it would be nice to have this taken care of in 6 months. And then NEVER be late on a loan payment again! (hopefully)

[Anonymous]

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@Anonymous wrote:
Hi Helplessintn. I want to thank you also for responding and for the word of caution. I remember reading somewhere that once a student loan has been rehabbed it needs to be picked up by a lender. I've also read somewhere that especially during this economy lenders are not picking up student loans even after they have been rehabilitated. I live in California and my one student loan (at least on all three of my credit reports) states it's under the US Dept of Education. Originally it was under two loans under the US Dept of Ed/FISL/SF. The loan rep I've been talking with has assured me that my loan's default status will be removed once rehabilitation is completed. I'm going to double check though about a lender needing to pick it up and inquire whether all of the late payments will be converted to PAA. I do hope your situation turns around soon and that your loans can reflects what was agreed upon since you did go through the process of completing rehabilitation. Thank goodness for this piece of legislation that allows for this opportunity to even exist. Although it's clear that given your situation something needs to be done.

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Chuckiss, I think I may have given you bad information.  My loans are FFELP loans, so I am not finished with rehab until a lender buys the loan.  I was making an assumption that there was only one flavor of rehab. 

I hope you're not in the same category I am, and that I didn't confuse you!

GOOD LUCK!!

Message Edited by helplessintn on 08-05-2009 02:11 PM

[bigtim]

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@Istherehope wrote:

Thank you so much Chuckiss.

It's nice to read that help is on the way. I have 6 more payments to make so I have a while yet, but want my loans to be picked up! It's funny that all that stimulus money went out to help the corporations-but students with student loans are the people who got screwed in the end. It is definetely my fault I defaulted-but I am trying to correct that and it would be nice to have this taken care of in 6 months. And then NEVER be late on a loan payment again! (hopefully)

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You'll be fine I'm sure. The loan rehab is really an excellent program for everybody involved. The lender(s) get their money, the borrowers get their credit fixed, it's a win-win for everyone. Too bad some others don't follow the success of this program... GL

[Anonymous]

As I promised I would do, the following is an update upon completing the student loan rehabiliation program:

I completed my student loan rehabiliation program on Sept 23, 2009, after nine months of payments. On Nov 10th, my Experian account updated to show that the Student Loan acct was current and being paid as agreed. On Nov 13th, my Equifax account updated and showed paid as agreed. On Nov 24th, my TransUnion account updated to show paid as agreed. I couldn't believe it! I was immensely elated.

However, I had two other student loan tradelines that appeared to be duplicates of the one student loan that I was paying through the rehabiliation program. They still had not been deleted and were showing as being in default along with all of the lates.

I was so happy to see though that on Dec 17th TransUnion deleted the duplicate student loan tradelines and on Dec 18th Equifax did so.

Upon completing the student loan rehabiliation program, the updating of my student loan to current/paid as agreed, and the deletion of the student loan tradeline duplicates, I saw my credit score increase on TransUnion a total of 63 points!!! My TU score jumped from 642 on 7/29/09 to 705 on 12/21/09!!!!

Having completed the student loan rehabiliation program is the one of the best things I could have done in terms of my credit. As another MyFico member once wrote to me "What use to be my biggest baddie became one of my best assets!" Also I went from paying about $600 a month during the rehab program to a monthly payment of $248 now that I completed the program.

I am now in a much better position to purchase a home which will hopefully be soon. Stay the course, be patient, and know that a year goes by quickly. Before you know it you too will be elated to see a credit report free of blemishes. It feels good and so worth it.

[fused]

Wow, Congrats, Chuckiss!!!!!!!!

[tbque]

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@Anonymous wrote:

As I promised I would do, the following is an update upon completing the student loan rehabiliation program:

I completed my student loan rehabiliation program on Sept 23, 2009, after nine months of payments. On Nov 10th, my Experian account updated to show that the Student Loan acct was current and being paid as agreed. On Nov 13th, my Equifax account updated and showed paid as agreed. On Nov 24th, my TransUnion account updated to show paid as agreed. I couldn't believe it! I was immensely elated.

However, I had two other student loan tradelines that appeared to be duplicates of the one student loan that I was paying through the rehabiliation program. They still had not been deleted and were showing as being in default along with all of the lates.

I was so happy to see though that on Dec 17th TransUnion deleted the duplicate student loan tradelines and on Dec 18th Equifax did so.

Upon completing the student loan rehabiliation program, the updating of my student loan to current/paid as agreed, and the deletion of the student loan tradeline duplicates, I saw my credit score increase on TransUnion a total of 63 points!!! My TU score jumped from 642 on 7/29/09 to 705 on 12/21/09!!!!

Having completed the student loan rehabiliation program is the one of the best things I could have done in terms of my credit. As another MyFico member once wrote to me "What use to be my biggest baddie became one of my best assets!" Also I went from paying about $600 a month during the rehab program to a monthly payment of $248 now that I completed the program.

I am now in a much better position to purchase a home which will hopefully be soon. Stay the course, be patient, and know that a year goes by quickly. Before you know it you too will be elated to see a credit report free of blemishes. It feels good and so worth it.

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[Anonymous]

I had 3 different student loans with Sallie Mae that I defaulted on due to personal issues. After a few years (of course Sallie Mae reported the defaults to the credit agencies) Sallie Mae sold the loans to E.C.M.C and they as well reported the loans as collections. So for 3 loans through Sallie Mae I now had SIX different delinquencies reported on my credit report. I filed disputes saying they were duplicated accounts but all three credit agencies said otherwise. I started my loan rehabilitation and paid (they said 9-12) 12 payments and then had to wait about 2 months for someone to purchase the loans. Before my credit score was 666 (yea, I know) and once ECMC's 3 tradelines were removed my credit score jumped to 702. YET, I still have the 3 original Sallie Mae negative tradelines being reported so my score should be much higher. It is like pulling teeth to get them to remove these tradelines although they are obligated by law to do so according to the Higher Education Act. So, moral of the story is, it is worth having your loans rehabilitated to improve your credit score, but you must practice patience. If anyone has any suggestions on how to get Sallie Mae to follow suit and remove their tradelines I would appreciate it. I have tried to be sweet and have threatened to sue... To no avail.