Student loan rehabilitation

[Anonymous]

Hi all! I have a question about my loans. I got loan from dept of education in 2011 and i have never made a single payment. Now I applied for rehab and only my husband works. They asked proof of income and last w-2. His last year w2 was little over 115k but this this he went nuts with overtime and have over 85k already. How much it would affect payment amount on loans if they see we can afford larger amount? I owe 82k, and we trying to get mortgage so would like to save as much we can!

[Anonymous]

If you can afford it, just start paying.
You aren't really 'saving' anything by putting them off. The interest on large a student loan will just snow ball. Plus, it won't help getting a mortgage if you aren't caught up with the student loan.

[Anonymous]

Sounds like your federal law loans defaulted. To get out of default you must either rehab or consolidate (and you can only get out of default once). Rehab has the most benefits, so glad that this works best for you. While you are rehabbing, you will be making 9-10 months worth of on-time payments to be able to get out of default. Once you make these payments, your loan will be transferred to a new servicer and you'll be able to be on a regular payment plan of your choosing.
To determine the payments for default, they can either just use the standard payment amount or more commonly, provide income and expenses for a reduced amount. What I'm not clear on is if, similar to an Income-driven repayment plan if you were with a servicer, they will take into account your tax filing status. On certain IDR plans, if you file your taxes as married filing separately, they will only count your income. That means that you could pay as low as $0 and in the end get your loan forgiven (sounds like that might benefit you?). However, the payments for rehab might require both of your incomes, and likely will if your filed your taxes jointly. There are a couple of recent threads from about least week on this very topic.
If it turns out that you need both of your incomes, there are ways to work it so the number comes out best for you. If you use the W2 method, I think your payments will come out the highest. Additionally, taxes are not due yet...I'm not sure about the rules if they are actually required to use last year's W2. Regardless, there is another way. They can use your tax/ W2 information but they can also use your paystubs/ timesheets. This may or may not be the best method for your husband given his pay now is much different without the overtime. They require different things for different methods of income verification so ask them what else you will need. Even with the overtime, of there is a paycheck that will calculate to a salary less than what he got last year, that will be your best option imo. Also take the time to fill out your expenses and give copies of bills. That will bring down your payment.
Once you are finished with rehabbing, the default will be removed. I don't think you can get a mortgage in your name without it. I don't really know much about home loans, clearing CAIVRS, etc. but there are a lot of posts under the mortgage topic. Make sure to keep making any payments due until the loan is placed with a servicer. Once you get your new loan servicer, you'll need to pick a payment plan. $80+k sounds like an ideal loan(s) for forgiveness. Some IDR plans will look at your income alone, but you'll need to make the decision to file jointly or separately, and weigh if it would save you money overall.
Overall you're in a similar position as many students but getting out of default will help you get back on track easily.
Do you have any questions? Would you like any links?

[Anonymous]

l actually just went through this (January - October). I didn't make a single payment towards my student loans, they went into collections and I was on the brink of being garnished at my job. I got a call from the student loan rehab (on behalf of Navient) and I started with them. They only asked me for my monthly bill amounts (rent, cell phone, daycare, etc). They didn't ask me for W2 or paystubs to verify.  Who are your student loans with (Navient, Sallie Mae, etc)? To answer your question though, whatever amount he's currently paying (the amount that was giving to him BEFORE his new wages), won't change. He doesn't need to let them know if he's making more money because, they will indeed have him pay more. Once he's completed the rehab program (7-8 months usually), they will transfer it over to a new lender and, he will start paying them directly (the amount he will pay to the new lender will be much cheaper than what he was paying to the rehab program). If you're planning to purchase a home though, make sure you get a lender in the mail from the rehab program confirming that he's successfully completed the program and that his student loans are in current standing.

Hope this helps!

[Anonymous]

Some of that advice is incorrect. I could be wrong; maybe someone else can weigh in.
When you don't pay them they get sent to a collection agency. They are no longer with the servicer (unless there are servicers with in-house collection solutions, which I've never heard of). To get your loan sent back or to a new servicer you have to rehab or consolidate. Rehab payments are only determined one of two ways, according to the official Dept of education guide:
1. "Under a loan rehabilitation agreement, your loan holder will determine a reasonable monthly payment amount that is equal to 15 percent of your annual discretionary income, divided by 12. Discretionary income is the amount of your adjusted gross income (from your most recent federal income tax return) that exceeds 150 percent of the poverty guideline amount for your state and family size. You must provide documentation of your income to your loan holder."
2. If you can’t afford the initial monthly payment amount described above, you can ask your loan holder to calculate an alternative monthly payment based on the amount of your monthly income that remains after reasonable amounts for your monthly expenses have been subtracted. You’ll need to provide documentation of your monthly income and expenses, including a completed Loan Rehabilitation: Income and Expense Information form."
https://studentaid.ed.gov/sa/repay-loans/default/get-out

As you can see, both options require that you provide documentation of your income. Collection agencies don't always follow the rules, but it is important to not that if you do not accurately report your income in the method they require, you could and likely will find yourself in legal trouble.
Ask what methods they require to verify your income, then use whichever is the lowest.
If a wage garnishment starts, those payments will be in addition to the involuntary payments required of rehabbing.
Once you're finished rehabbing, there is still a period before you'll have a clear CAIVRS report for a FHA loan.
'Understanding the FHA CAIVRS Report"
https://www.lendingtree.com/home/fha/requirements/understanding-the-fha-caivrs-check/
There are several recent threads under the mortgage topic where people provided a timeline of how long this took for them.

[Anonymous]

Yup. Yup. Payments after rehab are income sensitive.

[calyx]

---

@Anonymous wrote:
Some of that advice is incorrect. I could be wrong; maybe someone else can weigh in.
When you don't pay them they get sent to a collection agency. They are no longer with the servicer (unless there are servicers with in-house collection solutions, which I've never heard of). To get your loan sent back or to a new servicer you have to rehab or consolidate. Rehab payments are only determined one of two ways, according to the official Dept of education guide:

---

Jsut FYI: my servicer had in-house collections, so it does happen - but I don't think most of them do that.
It was also listed as a collection account when I defaulted (from being a standard-student-loan-account) on my credit report, so they still made the distinction and it made little difference in the end, the same procedure was generally followed, even if they kept it in the family

[Anonymous]

It was under the name of the servicer still? I was aware that some of the servicers own collection agencies, but I didn't realize some of them also connect themselves. Thank you for this information. Always learning something new about this.
The saddest thing is that a bunch of the collection agencies were involved in a legal situation over violations. The judge ruled they were supposed to stop collecting... but here we are.

[calyx]

---

@Anonymous wrote:
It was under the name of the servicer still? I was aware that some of the servicers own collection agencies, but I didn't realize some of them also connect themselves. Thank you for this information. Always learning something new about this.
The saddest thing is that a bunch of the collection agencies were involved in a legal situation over violations. The judge ruled they were supposed to stop collecting... but here we are.

---

Between this and the second-default info, I'm starting to feel like your personal monkey wrench!

edited to add: I had FFEL loans, I know the program has changed a lot over the years (federal vs private lendors, servicers changing, guarantors, etc), which might be part of the issue.    I wonder if they changed/clarified roles.  I know things especially got squirrely with the Sallie Mae/Navient (private/federal) change, too.

[Anonymous]

Calyx: Hahahaha! And I was just about to ask another question, lol!
Yes, so much change and yet, so little improvement. If only they did as much post-degree outreach and support as they did to get high schoolers to take out these loans in the first place.