Student Loan rehab program reporting as 120+ late

Anonymous · ‎08-16-2008

Is this the way it's supposed to work? My BF signed up with American Student Assistance student loan rehab and has been paying since May. 2 new TL's showed up on his credit report this month as ASA and they immediately started reporting the full balance as past due and that he's 120 days past due. Is this reporting incorrectly, or is this what they do when you rehab a loan? They report late every month? His scores just DROPPED 60+ points on each bureau due to this.

If this continues through the full 9 months, he'll have 18 lates on his reports from the 2 loans. What happens after the 9 months is up, do they remove the entire TL, or do these lates stay on for the full 7 years?

Thanks in advance.

Anonymous · ‎08-16-2008

I rehabed my student loan last year through NCO Financial. Your student loan company should not be reporting the account a late, unless the payments are somehow posting late. Note there is a lag in getting everything updated. I would call and talk to a rep and fax over your CR requesting they fix the info now. Once the loan is fully rehabed after nine months and you get the letter from the Federal Student Loan program, pull your CR again to see what's being reported. Then contact them and agin fax the latest CR.

They will clear it up it's part of the deal with rehabing your loan. "If you want the negative credit report made by the Department removed, you must successfully complete our loan rehabilitation program."

from - http://www.ed.gov/offices/OSFAP/DCS/repaying.html

Mine was cleared up. I rehabed through NCO, then my loan was turned back over to the Direct Loan Servicing center. When I pulled my CR my loan was showing with NCO, and about 4 other old collection agencies. I called and spoke with a rep, she requested I fax over the CR. I wrote a detailed note and documented on all 3 CR. It only took about 45 days for the info to be cleared up. And best of all -- All of my payments were listed as on time & good standing. Don't de afraid to call the rep and ask for what you want. And sign up for student loan access online.

The only bad thing for me is this loan is really really old, like over 10 years old, so having a loan this old does not help my credit.

Good Luck

Anonymous · ‎08-16-2008

Thanks for the response. The payments are being automatically debited from our checking account to make sure they are not late. To top it off, when he was setting it up, I was on the phone with him and the loan folks and asked if we could scheduled the payment to debit a little earlier to make sure it's never accidentally late due to posting, etc. .so we have it debited on the 15th even though it's not due until the 25th. The payments are being debited and I have the cancelled check images that can be sent to them.

I'll have him give them a call tomorrow. I had a feeling it was a mistake but then got scared that maybe this is the way they do it.

Anonymous · ‎08-17-2008

AlwaysAGoodFriend wrote:
I rehabed my student loan last year through NCO Financial. Your student loan company should not be reporting the account a late, unless the payments are somehow posting late.

Absolutely incorrect. When you default, the guarantor is forced to pay your default claim. While you are in default, regardless of the fact that you are making payments, your account is is still in a negative standing and any payments received are not credited as payments made on time. Only once the loan has been rehabbed will the tradeline be changed to reflect postive. This is outlined in the HEA.

Anonymous · ‎08-18-2008

LynnInMN wrote:

Absolutely incorrect. When you default, the guarantor is forced to pay your default claim. While you are in default, regardless of the fact that you are making payments, your account is is still in a negative standing and any payments received are not credited as payments made on time. Only once the loan has been rehabbed will the tradeline be changed to reflect postive. This is outlined in the HEA.

Lynn, I'm not quite sure I understand. These are 2 entirely new tradelines that were just opened on his credit reports and they immediately started posting as 120+ late since he started the program and has been paying on time. Are you saying that it's normal for a rehab program to post lates every month all through the program? If so, what happens when the it has been paid and the loan is considered to be "rehabbed"? Do they remove those lates, or are you stuck with them?

The reason I ask is because if need be, we can take the $ out of savings to PIF if he's going to wind up with 18 new lates on his credit report as a result of using this rehabbing program.

Thanks!

Message Edited by UpUpUp on 08-18-2008 10:39 AM

Anonymous · ‎08-18-2008

UpUpUp wrote:

LynnInMN wrote:

Absolutely incorrect. When you default, the guarantor is forced to pay your default claim. While you are in default, regardless of the fact that you are making payments, your account is is still in a negative standing and any payments received are not credited as payments made on time. Only once the loan has been rehabbed will the tradeline be changed to reflect postive. This is outlined in the HEA.

Lynn, I'm not quite sure I understand. These are 2 entirely new tradelines that were just opened on his credit reports and they immediately started posting as 120+ late since he started the program and has been paying on time. Are you saying that it's normal for a rehab program to post lates every month all through the program? If so, what happens when the it has been paid and the loan is considered to be "rehabbed"? Do they remove those lates, or are you stuck with them?

The reason I ask is because if need be, we can take the $ out of savings to PIF if he's going to wind up with 18 new lates on his credit report as a result of using this rehabbing program.

Thanks!

Message Edited by UpUpUp on 08-18-2008 10:39 AM

Piffing the account wont remove them either. ASA's tradelines would have shown up just as a matter of standard default reporting.

When you default, not only do you have the negative tradelines from the original lender/servicer but also from the guarantor in your case ASA. Regardless of whether or not you are paying the guarantor, those payments are never credited as current.....the loan is still in default. When you agree to have your loan rehabbed, you make the payments for 9 months...it is basically a test period to determine that you are willing and capable of making on time payments. Once the account is actually rehabbed, then ASA goes back and changes the tradeline to "paid as agreed" but not until the new lender has funded the account. The lender/servicer however is under no obligation to change their tradelines...you are stuck with those. But if you PIF the account now, you will be stuck with both ASA and the OC's negative tradelines.....this is the consequence of defaulting on a student loan. Rehabbing minimizes the damage by allowing the guarantors tradeline to change

Anonymous · ‎08-18-2008

LynnInMN wrote:

Piffing the account wont remove them either. ASA's tradelines would have shown up just as a matter of standard default reporting.

When you default, not only do you have the negative tradelines from the original lender/servicer but also from the guarantor in your case ASA. Regardless of whether or not you are paying the guarantor, those payments are never credited as current.....the loan is still in default. When you agree to have your loan rehabbed, you make the payments for 9 months...it is basically a test period to determine that you are willing and capable of making on time payments. Once the account is actually rehabbed, then ASA goes back and changes the tradeline to "paid as agreed" but not until the new lender has funded the account. The lender/servicer however is under no obligation to change their tradelines...you are stuck with those. But if you PIF the account now, you will be stuck with both ASA and the OC's negative tradelines.....this is the consequence of defaulting on a student loan. Rehabbing minimizes the damage by allowing the guarantors tradeline to change

Okay,then I guess we'll finish the program. I understand the consequences of defaulting on anything, as does he. I don't know if you recall, but my BF was the one whom I posted about a while back, whose parents paid his student loans for a good 8 years or so and then suddenly just stopped paying and never told him about it. All the information has been sent to their house since he was in school, and while we already covered the part about him probably having to have signed the dotted line...their agreement was, as it is with many parent/child relationships was that they were paying for his education. From the perspective of that arrangement he was royally screwed and we are just trying to minimize the damage. It seems that the best route, as you mentioned is to continue on until the loan is rehabbed and is taken/purchased back by the lender. Atleast then the ASA tradelines will be updated with a positive status. Then after the lender has the loans back, we'll PIF and be done with this nightmare.

Message Edited by UpUpUp on 08-18-2008 01:46 PM

Anonymous · ‎08-18-2008

P.S.

Lynn, thanks so much for all of your inpur here. It's hard to get good information on student loans and you have been such a big help.

Anonymous · ‎03-23-2009

It is BS that they say that it is COMPELETY removed from your cr, but really they only start a new tl stated that it is on time, you don't need the program to had it start to report as current..

Anonymous · ‎03-25-2009

@Anonymous wrote:
It is BS that they say that it is COMPELETY removed from your cr, but really they only start a new tl stated that it is on time, you don't need the program to had it start to report as current..

How do you get a loan to start reporting as current without rehabbing?