Defaulted Student Loan

Discussion in 'Credit Talk' started by Cathy, Apr 26, 2000.

  1. Cathy

    Cathy Well-Known Member

    I have just paid off a defaulted student loan, and they claim they will only list it as a "PAID DEFAULTED STUDENT LOAN" is this really going to hurt me? Being paid is better than not being paid, right?

    Any advice is greatly appreciated
     
  2. Steven Z

    Steven Z Guest

    Ordinary no, as the credit industry has shot themselves in the foot by treating a "paid loan/collection" EXACTLY THE SAME as an "unpaid loan/collection".

    The only time its worth one's effort to pay it off is when you are applying for a mortgage of some sort.

    But in the case of a student loan, I'd say yes as it will likely follow you the rest of your life like a millstone unless paid off (Government never forgives or forgets).

    So yes it was worth it, though the negative entry will remain on your credit history and will lead to the usual rejections, high interest and poor offers until it is purged.
     
  3. Steven Z

    Steven Z Guest

    Ordinary no, as the credit industry has shot themselves in the foot by treating a "paid loan/collection" EXACTLY THE SAME as an "unpaid loan/collection".

    The only time its worth one's effort to pay it off is when you are applying for a mortgage of some sort.

    But in the case of a student loan, I'd say yes as it will likely follow you the rest of your life like a millstone unless paid off (Government never forgives or forgets).

    So yes it was worth it, though the negative entry will remain on your credit history and will lead to the usual rejections, high interest and poor offers until it is purged.
     
  4. Len

    Len Guest

    RE: Defaulted Student Loan - T

    Cathy, check the Nolo.com site for information on the legality of having that on your record. According to a new federal program, once your loan is paid off, the Dept. of Education or the guarantee agency must notify the credit bureaus that your loan is no longer in default. The credit bureaus must remove the default notation from your credit file.

    This was made law by Congress in 1999 in order to encourage repayment of defaulted student loans. It will not remain in your file.

    An excellent source for the latest information on student loans is attorney Robin Leonard's book, Take Control of Your Student Loan Debt (Feb. 2000).
    Don't accept that notation in your credit file when it's not necessary.
    Don't let this rest! Good luck!
     
  5. Cathy

    Cathy Well-Known Member

    RE: Defaulted Student Loan - T

    Thanks Len,

    I will definately check it out.

    Cathy
     
  6. curiouser

    curiouser Well-Known Member

    RE: Defaulted Student Loan - T

    Cathy,

    Word of advice. Keep all papers noting that you have paid off your student loans and keep them forever. My mother received a student loan in 1961 which she paid back. In 1977, the government came calling for the loan, plus interest. She paid again and this time had the foresight to ask for the original note with a notation of paid in full. She received it. In 1989, the Dept. of Ed. came calling again saying that they had no record of the 1977 demand or payment. Had she not had the original papers, she would have had to pay a third time with nearly 30 yrs. interest.

    Just keep everything.
     
  7. Don

    Don Well-Known Member

    My wife defaulted on several..they were then sold to a third party, whom we quickly paid off...the third party showed it as such...very favorable for her wounded credit. Here's what we were able to do and not do:

    1. The CBs would not remove the original defaults, but they did finally update and show that they were defaults, paid to a third party, and balance is zero.

    I would think that if they are paid, the best you can do is show them as "charge-off paid"....but point out to whomever is looking at your credit that the debts are paid..

    Interesting situation we just went thru in apply for a large (250+) construction loan. Though my income/credit/assets carried the loan, the bank did not have much heartburn with her wounded credit as part of the application...when I talked further to the bank loan officer, saying I was already starting to write explanations, she explained that a lot more of the decisions are now made via Fannie Mae, leaning less toward credit bumps here and there, but looking at previous mortgage history, income, and assets..

    Have faith...I think it is getting better...maybe not for credit cards, but certainly in the mortgage business...
     

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