Consolidation or Rehab Student Loan

Discussion in 'Credit Talk' started by new here, Apr 30, 2001.

  1. new here

    new here Member

    I am in the process of Cosolidating my Student Loans, but after finding this board last week, I keep reading about rehabbing student loans. Which is the better choice? I asked the person at the student loan place, and he of course said consolidation, but I thought I would ask here for an unbiased answer.
  2. roni

    roni Well-Known Member

    Rehabilitation is the best choice. But that depends on what you are doing right now or your plans.

    I consolidated. Why? Because, I was being commissioned as an officer in the US Army Reserves and I could NOT have any student loans in default. I need a quick fix. Also, I had a battle going on with my lender anyway, and I wanted the matter cleared the right way instead of rehabilitation.

    But I am rehabilitating some late payments on a perkins loan now. ONce all my retroactive deferments were applied, I was 90 days late. So I am rehabiliating the late payments thru an agreement between my college and myself, because they partially were at fault for me being late, them being slow in sending me the paperwork. But, anyway, rehab is only 12 months.

    I know that even when you consolidate, you still have to account for the paid collections. And they hurt.

    Definitely, rehab, if you are not needing big credit items right now, like a house or car.

  3. marci

    marci Well-Known Member


    I'm glad you did stop here first. It is almost always better to rehabilitate the loans if:

    1. You can afford to pay 1.5% of the total loan amount for 12 months (this amount is negotiable if you can show a financial hardship).

    2. You don't mind having the interest and collection costs added to your principal to create a new (higher) prinicipal amount.

    Rehabilitation gets the negative loans completely deleted from your credit reports after 12 months of on time payments - in addition to bringing you out of default. Consolidation will bring you out of default as well, but the loans - if they are listed as "unpaid collection" on your credit reports - will be listed as "paid collection". In terms of a credit rating it remains I5 whether it is paid or not.

    Rehabilitation is your right under the Higher Education Act, so don't let the rep pressure you into a consolidation just because he wants to clear his accounts quickly.

    If you search this site for "rehabilitation" and search www.carreonandassociates for students loans and rehabilitation, you will learn more about it. Also, Direct Loans (Williams D. Ford) can send you information on the difference as well as the Student Loan Aid Office (1800-4FEDAID).

    Best wishes,

  4. new here

    new here Member

    Thank you both so much for responding, and I will check out the information you suggested. I have one more question, the loan officer said that if I go with rehabilitation, at the end of the 12 months it will be deleted with them, but not the companies they got the loan from. Do you know anything about this?
  5. roni

    roni Well-Known Member

    You need to get written agreement from both the lender and the guarantor agency that the defaults will be COMPLETELY removed.

    You are speaking to someone who doesnot know the rules and is only speaking about what they are USE to doing. That does not make it correct.

  6. marci

    marci Well-Known Member

    I've "been there and done that" - lol! :)

    Okay here's the deal. The Higher Education Act's section on Student Loan rehabilitation, quoted at, states that ALL entries pertaining to the rehabilitated loan should be deleted - including older entries by original servicers. The problem is that the wording is not explicit on that point and, therefore, original servicers are not obligated to comply with the rehabilitation section and delete the information from the credit reports.

    However, when I had a problem getting an original servicer, USA Group, to delete it's entries after my rehab, I called Pamela Moran at the Dept. of Education, to ask exactly which tradelines the rehabilitation Section covered. She told me that the Section was definitely meant to apply to ALL tradelines, though it wasn't explicitly worded that way. Anyway, I called the Ombudsman's office at the DOE and got the same interpretation from another specialist case worker. He managed to get USA group to agree to delete it's entries, even though he reiterated that they "didn't have to". He said that he appreciated me bringing the issue up b/c the writers of the Higher Education Act needed to know what where the act was weakly stated and needed rewriting. If you do a search here for "pamela moran", you will find her e-mail and phone number.

    At any rate, when I disputed with the CRAs, USA Group didn't verify and so they got deleted anyway.
  7. roni

    roni Well-Known Member

    Same here Marci....USA verify.

  8. MikeB

    MikeB Banned

    I had 2 student loans totaling about $30,000. I started getting payment due notices on one of the loans before I graduated . I called the school and was told that it was a mistake and that it wouldn't be reported on my credit report until the 180 day mark. Wrong. It showed up as 90 days late. I was involved in a wreck and had to take off for one semester. It took numerous calls to figure out that my in-school deferment was used the semester that I took off, and the loan was due 6 months after that day. Anyway, I consolidated the two loans into one loan and used Junum to dispute the old accounts that would be shown as paid in full because of the consolidation. The loan was deleted from all of my reports except for one, and Junum did not dispute that one yet (is being disputed now). If you decide to consolidate, you might try and dispute the old loans like I did. Also, if you have Direct Loans, make use of the change payment date feature on their website as I have been able to skip a month (move payment date ahead) every once in awhile. Just don't abuse it:) Forberance and deferments are also easy to get, so there is no reason to be very late on payments or default. A bad student loan can ruin your credit forever (not just 7 years). Good Luck


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