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Will SM remove default after Rehab too?

Frequent Contributor

Will SM remove default after Rehab too?

Hi all,

I'm a bit confused, because I keep getting conflicted answers.

Please note--my concern isn't about the lates (30, 60, 90, 120+) that come along with my default loans with Sallie Mae at this point. My only question is whether or not Sallie Mae will go back and remove the "120 past due/Claim Filed" after I am done with the rehab process, even though the loans are not longer with them but with HESAA, which is also reporting. Some people said NO, the only tradeline and notation that gets improved is the CURRENT loan holder, NOT the prior holder. 

Is this true?


My SM loans all got sent to NJ HESAA, who was the guarantor. I am rehabbing with them. They said once I am done, Nelnet will purchase my loans and HESAA will delete all their tradelines to show as if they never happened--then do I notify SM to remove their status as well that I mentioned above and are they required to change it?


Some articles said that SM will NOT remove the default status and are not obligated to do so, just the current holder will improve theirs (in this case, it would be HESAA). Like I said, I'm okay with the lates being there (well, not really) as long as the 120/Claim Field status gets removed from all 5 original TLS.

What do you think? Experience? Thank you in advance... 

Message 1 of 17
Established Contributor

Re: Will SM remove default after Rehab too?

Interesting question, because the law says that if you rehab, all mention of the default must be removed by the guaranty agency or loan holder.But there is some policy paperwork floating around the Interwebs that would indicate that information from previous loan holders stays.


From the DoE's PCA procedures manual: "Collectors must not state or imply to borrowers that the default informationreported by the original lender (e.g., the bank that made the FFEL) or by the guaranty agency or Department will be deleted or expunged before the applicable 7-year period has run.. Adverse information (default status) reported by a guarantor or the Department will be expunged earlier only if the loans has been rehabilitated. Adverse information reported by the original lender will not be expunged or excluded from credit reports before the 7-year period that runs from the lender’s report of that default, even if the loan is rehabilitated."

Message 2 of 17
Frequent Contributor

Re: Will SM remove default after Rehab too?

Thank you for sharing that with me! It makes me question whether or not rehab is the right thing or not then for me.

The agency that has all my loans don't have separate entries on my CR like SM does--they lumped all my loans together for one big balance and reported it as one TL. So if rehab is only going to get rid of that one TL, then it's most likely not worth it since the other 5 TLs from SM will still say 120/claim filed. Maybe I'll quit rehab and just do Direct Loans Cons. 

Message 3 of 17
Established Contributor

Re: Will SM remove default after Rehab too?

Did you consolidate? I haven't heard of all the tradelines being dumped into one like that.

Message 4 of 17
Frequent Contributor

Re: Will SM remove default after Rehab too?

No, I didn't consolidate. 

I have 5 loans with SM that went back to the guarantor, which is NJ HESAA. 


6 months ago, HESAA sent me a bill and said "as a convienance, we've merged all 5 of your federal loans together for one lump sum," and when I pulled my reports, there is only a single entry with HESSAA with the balance of all 5 loans.


Given that information, do you think it's even worth me rehabbing just to get that single TL removed, if the other 5 SM loans are going to always say default? The main reason why I wanted to rehab was because I thought at least the SM loans would remove the default status, even if all the lates and stuff will still be included. I mean, if I already have 5 bad defaults, I don't think one more with HESAA is going to make much difference if I just consolidate instead of rehab... 


I don't know, I'm 4 months into Rehab.. I just want to make sure I'm doing the right thing... 

Message 5 of 17
Established Contributor

Re: Will SM remove default after Rehab too?

I'm really surprised to hear that they can do that, to be honest. Does your NSLDS account show separate loans?


I still think it's worth rehabbing, especially considering you're almost halfway in. I'd be interested to know if, when Nelnet purchases the loans, they'll be a single loan or whether they'll be listed as separate. This might be a bit of a stretch, but if the loans were only lumped together with HESAA as a result of the default, then could you argue that the involuntary consolidation had to do with the default and thus should be reversed? You didn't agree to that.


And just between you & me - there are cases where people have gotten prior-lender info removed. Policy book says no, but there are many CA's out there that will PFD even though it's technically not okay with the CRAs. I wouldn't give up on the whole thing just yet. Consolidation vs Rehab is a difference of four months. That's not long.

Message 6 of 17
Frequent Contributor

Re: Will SM remove default after Rehab too?

The NSLDs site shows them as 5 separate loans and says that SM is the servicer (or lender, I forgot which it said) and that HESAA is the guarantor agency. 


Thanks for mentioning the PFD for CAs--but my prior loan holders weren't CAs, they were with SM and went straight to HESAA.

OH WAIT--I guess you were just using an example that even though a CA doing a PFD is against CRA policy, that prior loan holders may even remove negative information. Sorry, lol.


What would be the positive of the thought you gave me about involuntary consolidation? That HESAA would just separate the loans? But then all the entries would pop up from them seperately instead of one TL, right? 

I was also told by a rep at HESAA that once Nelnet buys the loan, it will still be reported as one single TL--does that mean that I wont be able to consolidate with DL? Sorry, I know I'm being annoying!!! I'm probably confusing the matter more than it needs to be, LOL. 


BTW, I'm taking your advice and just finishing up with rehab since you also mentioned that I'm pretty much halfway there anyway.. might as well wait it out and see.

Message 7 of 17
Frequent Contributor

Re: Will SM remove default after Rehab too?

Oh and one more quick quesiton InvincibleSummer (I know you probably regret ever responding to me, haha) but is it considered to be inaccurate reporting on Sallie Mae's part that all those loans are saying "120 Days Past Due" in the status since they already got paid when they filed their claim through the government and now HESAA has it? Or is that normal for it to report that way? The past dues are listed as 0. 

Message 8 of 17
Established Contributor

Re: Will SM remove default after Rehab too?

I can't figure out how they could just consolidate multiple loans like that into one. I have crawled the entire Internet during my student loan research, and I have never heard of such a thing. And if HESAA is deleting anyway, and according to the feds (NSLDS) you actually have five loans - I am amazed that anyone at HESAA thinks that they can magically lump them together for no reason. I wonder if, when they get picked up by Nelnet - if you won't see five separate "good" tradelines despite what the CSR had told you.


I was answering questions earlier for someone over in Rebuilding who HAD consolidated, and she wanted them all in one, and they were still showing as two (subsidized and unsubsidized) on her NSLDS account. Good heavens - can we please get some kind of  reasonable standard here for student loans? These loan people are all over the place.


Off my soapbox, now...


ETA - I would never regret responding, no worries. I don't think the 120 days past due are inaccurate; they would have had to have been that late to default. But like I said, it's not out of the question that those TLs could go completely. I've been trying to figure out the relationship between lender/servicer/guaranty agency and how this all fits in with the rules around rehab. I'll keep you posted on what I find out.


Message 9 of 17
Established Member

Re: Will SM remove default after Rehab too?

They removed all the lates/default off of mine, it showed that I have been on time since I first opened the loan. Original servicer was Wellsfargo, transfered to Sallie Mae than I defaulted than it transfered to Xpress Loan Servicing (AES took over this loan when they went of business) and rehabbed through collection agency NCO. Sallie Mae took over my loan briefly after rehab for about 2 months than I consolidated it and it transfered to Direct Loans.

Aug 2011: EX: Below 500's EQ: Below 500's TU: Below 500's
April 2013: EX: 561 EQ (myFICO): 606 TU: 614
May 2013: EX: 689 EQ (myFICO): 623 TU: 615
June 2013: EX: 712 EQ (myFICO): 659 TU: 649 EQ Direct: 576

Finished rehab August 2012. Equifax no longer shows any deliquency, Experian has one deliquent account, and Transunion has 2 reporting.
Message 10 of 17