Federal Student Loan Rehab – The Law and You .. please read

Feb 182011
 

there have been many posts recently regarding SL rehab and i think some of you guys are not fully understanding what this means. 

 

in short, after you rehab a loan, the CRAs are required to remove the DEFAULT STATUS ONLY.  see below for the exact language.

 

they will not delete your defaulted loan history.  they will not delete your lates.  they will not delete the tradeline. 

 

what happens on your CR is this…

your loan status field is changed to PAID OR PAYING AS AGREED, the loan balance will be zero, and the loan will be closed and possibly marked TRANSFERRED TO ANOTHER LENDER in the remarks field. 

the closed loan will stay on your report for 7 years from the date it was closed, and the lates will fall off 7 years from the date the late payment was due.

 

on the bright side, you reset the 10 year maximum loan repayment period  and your new loan will stay on your report until paid in full plus 10 years.  so the new loan it will outlast your old loans and if you pay on time every month you will have the positive history for much longer than you will have the negative history.  also, any privileges lost by going into default are restored, and adverse actions such as wage garnishment and collection activities are ceased.

 

please note that i am not taking into account GW adjustments.  it is possible that down the road you may be able to talk the lender of the defaulted loan into deleting the tradeline, but this is NOT required by law.  they are actually required by law to report accurately, and any GW adjustment or ‘mistake’ in your favor is not the norm.  if you have personal experience to the contrary please chime in.  we’d like to know how you did it.

 

 

 

 

20 USC § 1078–6 (C)

Upon the sale or assignment of the loan, the Secretary, guaranty agency or other holder of the loan shall request any consumer reporting agency to which the Secretary, guaranty agency or holder, as applicable, reported the default of the loan, to remove the record of the default from the borrower’s credit history.

 

34 CFR § 682.405   (b)(2)

The guaranty agency must report to all national credit bureaus within 90 days of the date the loan was rehabilitated that the loan is no longer in a default status and that the default is to be removed from the borrower’s credit history.

 

the applicable law for FFEL (stafford) loans is  20 USC § 1078–6, found here http://www.law.cornell.edu/uscode/uscode20/usc_sec_20_00001078—-006-.html

the applicable regulation for FFEL loans is 34 CFR. § 682.405, found here http://law.justia.com/us/cfr/title34/34-3.1.3.1.40.html#34:3.1.3.1.40.4.40.6

the terms for rehabilitation of perkins loans are essentially the same as stafford loans.

Trying to enter Student Loan Rehab, but not sure I am really entering Rehab program

Mar 092010
 

hi,

 

I’ve been lurking for a long time, but now I need help that I can’t seem to find my lurking only.

 

My 2 student loans went into default on 5/13/2007.  Yesterday I sent an e-mail to the company I believe is the guarantor, American Student Assistance, (ASA) asking about their rehab program.  This morning I received a response from the Borrower Advocate, stating I should call the main number and use option 1.

 

After an hour or so of debating my next stepsI called and spoke to a gentleman.  He was not very helpful, but not horrible eitherthank goodnes.  I asked to get into the rehab program and he told me I cannot be accepted into rehab until I make 9 payments on time, and asked when can I make the first payment. He asked for $100 per month, but since I have not worked since Oct 2008 I told him I could not pay that much monthly right now.  He agreed to $75 per month, I told him I would send a money order when I receive something from ASA.  He told me he would send me a statement today, but I would not get anything about rehad until after the 9th payment is received.

 

This just seems a little odd.  Shouldn’t I receive some paperwork stating the terms of rehab first? 

 

Without this forum I would never have known about rehab, and I would still be afraid everytime the phone rings.  Thanks so much for helping me get this far.

 

 

Does the borrower pay for the lenders title insurance on a new mortgage?

Feb 242010