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.

I’m in a student loan pickle…please advise

Jan 192011
 

Hi,

 

Here is a little background on my issue:

 

I have 9 total student loans, 4 of which are currently in default status.  I’ve attempted to rehab these 4 that are in defualt status, but failed after only making 6 consecutive payments. 

 

I’m currently in the process of consolidating all 9 of these loans, but just received a notice from Direct Loans that I should reconsider consolidating the loans that are in default because the default status will remain on my credit report for 7+ years.  I should instead attempt to rehab the defaulted loans. 

 

My question is twofold…can you rehab a loan after already failing a rehab?  In otherwords, can you rehab a loan twice?

 

Also, what is the date the 7 years on my credit report would start based on this info?

 

DF  DEFAULTED, UNRESOLVED   10/12/2009 
    RP  IN REPAYMENT   09/15/2008 
    XD  DEFAULTED, SIX CONSECUTIVE PAYMENTS   03/29/2008 
    DF  DEFAULTED, UNRESOLVED   03/08/2007 
    RP  IN REPAYMENT   05/02/2006 
    DA  DEFERRED   08/22/2005 
    DA  DEFERRED   01/10/2005 
    IG  IN GRACE PERIOD   12/14/2003 
    IA  LOAN ORIGINATED   08/25/2003 

 

Would the 7 years start in 2003 or 2007 when the loan first went into default? 

 

I was hoping someone could offer me advise on my situation…

 

Thank you!

Defaulted loan paid off. What to expect in credit report?

Dec 222010
 

I paid off my defaulted loan in August of this year, and want to know what changes I should see in the credit report? I’ve read in various post that the item will stay on the report for 7 years, but reported as zero balance. It is unclear to me whether the item will fall off at all (I assume no), and whether this will continue to have a negative impact to my score?

 

Thanks!

Fha loan with a defaulted student loan

Dec 052010
 

I am doing the rehabilitaion program for my defaulted student loan. Does anyone know if I qualify for a fha loan now or do I have to wait for my loan to get out of default?

Paid off student loans, but my credit score dropped. What can i do to raise my score above a 600?

Apr 232010
 

I recently paid off my defaulted  student loans, and reported to the bureaus that they had been paid, but my credit score hasnt moved, its been a little over 60 days and I havent seen a change.  What else can I do to raise my scores?

What order should I fix my credit in? Need some rebuild 101 advice!

Mar 222010
 

At 29 and being denied credit and having nothing nice of my own with a professional full-time job I decided it was time to move in with the parents for a year or two and fix my credit so I can enjoy my 30’s and enjoy all the hard work I put it.  I maybe grew up towards the end of my 20’s as well and started being responsible.

 

Before starting my credit score was 500.  I have not checked it recently as I was thinking I would check it in August after I have paid most everything off.  Most of my debt is rather small.  I was just neglectful and stupid. 

 

I have 6 charge offs (all credit cards), and 3 of those have a balance greater than 0 and 3 have a balance of 0.  The charges off are all 5 years old.

 

I have about 10 collection accounts that show up under “negative” items on my credit report and 7 items that show up under the “collections” account.  These items range from a bank to cable to phone to CA for the OC for the charge offs.  I also have a defaulted private student loan.  All these items are 3 years or less.

 

Currently I have set up a payment plan on the defaulted private student loan and hope to finish paying for it in June.  My plan beyond that was to pay the items that are the most current defaulted items and then on to the older items.  I started in January and will be finished paying on all bills in July.

 

As of this month (March) I have paid off several of the collection accounts and the negative items.  I have also paid off one of the charge-offs.

 

My report is not all bad.  I have several good standing accounts and all good standing accounts are current accounts.  My last 30 day late was about 2 years ago, with the exception of the one defaulted private student loan that was a 1.5 years ago.

 

I want my score to go as high as possible.  I have no intentions of buying a home.  I prefer to rent no matter what my score would be.  I would like to purchase a new car though.  At the end of next month I am opening 2 secured credit cards to help rebuild my credit.  I won’t use more than 30% as I am very dedicated to fixing my credit and living a life on the “cash basis” rather than the credit basis. 

 

If I pay off my collections account and negative items should I stop there?  My charge offs with balances are two years from falling off.  I have read the collection accounts don’t help if you pay them.  Should I leave them and pay the charge offs before I pay the collection accounts to help raise my score faster?  What is the best approach?

 

I am just confused with the right way to pay them and what will boost my score the most.  I would like to get to a 625-650 before I get a new car. 

 

Thanks for your input!

Statute of Limitations on a really old defaulted loan?

Mar 012010
 

I know that due to changes in federal laws in 1998 and 2005, collection on student loans now have no statute of limitation, but my defaulted student loan is from 1988, and when I took this loan out, there was a statute of limitations of about 20 years (I believe, but I am not sure.) Does the change in law mean that even loans such as mine, that were taken out prior to the law rewrite, are still subject to collection even after so long?

Rehabilitation Complete

Feb 082010
 

Here is my situation…. I just recently rehabilitated 2 student loans, while my wages were being garnished. Luckily, I make pretty good money and should have done this loooong time ago. When I completed my rehab they were sent back to the Fed.Student Loan Servicing Center and  my garnishment stopped. As soon as, I recieved the letter of completion I checked my credit reports, which I was currently in the high 500′s (I know sux) and notice that my credit score increased and placed in my the mid 600′s. My Fico is currently reporting 646, but has only removed all bad data/bad payment history from one loan and not the other loan that was rehabbed at the same time with the same CA company.  Direct loans currently show both loans are current and paid as agreed. 30 days has passed since I recieved m rehab letter and equifax is still reporting the defaulted loan. Any words of wisdom???

 

I went to equifax and did the dispute thing and talked to DL and they say that the info was sent out and should be update….