cancel
Showing results for 
Search instead for 
Did you mean: 

UPDATE! Best option

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
Frequent Contributor

UPDATE! Best option

Okay, so I will try to keep this brief.  I am looking at options for what to do with my currently past due Fed SL balance.  I put in a lot of hard work in the last year to restore my credit.  Only to have a major life event happen that put a big screeching stop on my progress.  Not an excuse but it is what it is.  I have late payments since February from my SL provider.  I am rapidly approaching default and want to know what best option to take.  We haven't given up dreams of home ownership ( FHA loan), so that is the end goal eventually...within the next year or two for time reference.  The way I see it, I have a couple of options.  

 

A)  Go into default, then to rehab, make the required monthly payments to have the lates removed from my report in 9 months (Is that still possible?)

or

B)  Pay my past due balance (<3k) and start making monthly payments on time on IBR

 

My current balance is 114K in SL.  My IBR would be $417.  I was on IBR before but was switched to REPAYE (I've just learned today), at $1286, during this period of nonpayment.

 

Thoughts or advice appreciated.

12/21/2018 to 3/13/2019
Fico 8:
to
to
to

Mortgage:
to
to
to




Message 1 of 6
5 REPLIES 5
Established Contributor

Re: Best option

Radfam:
I'm sorry that the life event detailed your credit. No excuses needed! It happens. The most frustrating thing is that many borrowers are not aware that the student federal loans are unique in that give you several options if this happens. There is a hardship deferment or an unemployment deferment, as well as administrative deferment servicers sometimes give out like candy. They will hault your payments and give you time to recover (interest will accrue).
Now at $100k+ and your plan I assume you're going for forgiveness, right? So interest doesn't matter. Over 100% balance only holds back your credit score a bit so no worries there. Imo it's the derogatories, which will take years (7?) to fall off that are going to hurt you the most. And there is no good willing them.
So let's start from scratch. Please do not even consider #1. There are so many more options and this can really have a negative impact on your credit score. You'll get a bunch more lates that will take forever to come off. The lates *may* get removed but there seems to be an almost equal amount who cannot get them removed because it never guarantees the removal of the lates, just the default.
There are a few thoughts going through my head, one of which is your payment plan. You said they switched you. There loan servicer never just switches you; you have to request it such as on the annual recertification for all IDR plans. Did you remember to recertify? If not, you've been automatically put on the standard plan (which would explain your high payments). The other option is if you did ask to be switched (including letting them pick your lowest point plans because they have a tendency to pick whatever plan they want, lowest or not), then it could be because your married. Don't quote me on this but I believe IBR only uses your income if you're married filing separately and REPAYE uses both incomes regardless of how you file. Might be something to double-check. Other than this detail, REPAYE tends to be lower payments than IBR at only 10% your disposable income vs 15%.
This leaves you at what to do for now: call your servicer right away. A good account specialist (and I tend to speak with the advisor instead of the first person who picks up) will go over all of your options on the phone with you. Last time I did an administrative deferment, the person also brought my account current. It didn't erase the lates but I didn't owe them money I didn't have on my next payment due date. They did this when I turned in the IDR recertification too.
Next, if you truly can't make any payments, go for that hardship deferment (or any deferment that works for you. Sometimes people even take college classes part time for that deferment. Extreme, but better than default I'm.
At an IBR payment of $417 your income must be pretty good. If you can come up with the past due amount it would help you greatly. Then you could just call in to get an administrative forbearance while you fill out the paperwork to get out back on IBR.
I know this is jumbled but hopefully it makes sense to you. My advice is from my experiences. Any questions?



Message 2 of 6
Frequent Contributor

Re: Best option

Just wanted to update on the outcome of my original post.  I contacted Great Lakes within a couple of days of my original post and was granted a forbearance on the spot.  It was granted through 04/19 but not yet retroactively.  I don't need that long and already have been discussing with the rep about pulling it out of forbearance early.  My IDR needed to recertify, hence the huge jump in monthly payments.  Easy peasy and done.

 

Yesterday, I sent a goodwill letter through the "contact us" option on their website.  There was a specific dropdown for credit bureau questions.  I copied and pasted my goodwill letter contents into that box and hit submit.  Within 5 minutes, a lady emailed me back to let me know they have granted a retroactive forbearance on the late payments and have instructed 4 bureaus (EX, EQ, TU, and Innovis) to remove the information for those months.  I don't know when I will see this reflected on my reports.  My Myfico subscription updates on the 13th and I'm hopeful it has updated by then.  Fingers crossed!

12/21/2018 to 3/13/2019
Fico 8:
to
to
to

Mortgage:
to
to
to




Message 3 of 6
Established Contributor

Re: Best option

Radfam: that's fantastic!
I'm glad you were able to get it fixed.
If you switch from IBR to REPAYE there is a standard payment you need to make in between. However that payment can be reduced to as low as $5 (if you are aiming for forgiveness, I don't see the reason for requesting anything more than $5).
If not, yes get off that forbearance asap because I don't think it reports as an ok payment on your report, just blank.
You are one lucky borrower; most people have zero luck with the retroactive forbearance. Good to know that they will do it.
If your reports don't update in a few months, just do a dispute with the credit bureaus and give them the forbearance paperwork. This will get it removed. Keep us updated as to your score change. 😀



Message 4 of 6
Frequent Contributor

Re: Best option

Thanks Sabii!  Yes, I am considering myself quite lucky in this moment.  For IBR > Repaye, I found out that it was an auto switch from IBR to REPAYE alternative because I failed to get my IBR paperwork resubmitted.  The rep said I just need to resubmit and can switch back over with no issues.  I am not necessarily aiming for forgiveness, but that will likely be the scenario that I end up in...25 years from now.

12/21/2018 to 3/13/2019
Fico 8:
to
to
to

Mortgage:
to
to
to




Message 5 of 6
Established Contributor

Re: Best option

Radfam:
Oh that makes sense.
Next year I'd suggest submitting at least a month, maybe two, early. I submit mine throughout the year actually. Once too get signed up, you can get it recalculated at any time when you have a pay change. So let's say you have a paycheck that is there lowest during the year for any reason. Resubmit that with the application (select recalculate early) and they will lower your payment. That payment is now good for a year. It's optional so when the pay is higher, you don't have to resubmit because it's locked in for a year.
It changes the renew dates a bit, and if you always get paid the same it didn't apply, but if you're going for forgiveness, might as well get the most forgiven possible.
For the same reason if life every happens again, just recalculate instead of doing a deferment. The payments on your report will help continue building your credit.
The other good news I found out yesterday thanks to helpful members here is it's very possible to pass 800 credit score with student loans over 100%. If you can maximize the other areas of your credit score then you'll get a nice score bump.
Good luck with your journey. 🙂



Message 6 of 6