Rehab or Consol student loans?

Discussion in 'Credit Talk' started by Hobo, Mar 28, 2001.

  1. Hobo

    Hobo Guest

    Right now i have 6 entries in my credit report for defaulted student loans. My loan collector recommended consolidation but I'm thinking that if I do that, these entries will be marked as paid and re-aged so that they'll stay on for another 7 yrs, still showing my late payments and dragging down my credit. On the other hand, I'm thinking if I do the rehab all these entries will be deleted in a year, then i can consolidate. Am I thinking correctly? Anyone know the scoop on this? I can't seem to get any educated answers from anyone. Should I go for consolidation or rehabilitation? Thanks for any help.
  2. Fl-tan

    Fl-tan Guest

    Re: Rehab or Consol student lo

    Consolidation is the ONLY right that you retain while in default. If you do consolidate while you are in default, you consolidate the inflated default loan amount. And it will show on your credit as a defaulted consolidation. Rehabilitation is your best option in the long run. Rehabilitation, after completion, will remove the penalty from your account and will alson allow you to do a standard consolidation. One thing you need to understand though, while you are in rehabilitation, you can not be even one day late on a payment or the process will start all over again. In most cases, you will need to make 12 consecutive months of on-time payment. The actual time period is determined by the servicer/collection agancy and there is not flexibility by them normally...they do know they have you by the "short hairs". Also, you need to understand that defaulted student loans will never "just" go away over time without you doing something. They cannot be forgiven by bankruptcy...only death or permanent and total disability will allow student loans to be forgiven.

    Please understand one last thing...everything I have said deals only with Federally Guaranteed Student Loans and not Private Student Loans

  3. marci

    marci Well-Known Member

    Re: Rehab or Consol student lo

    You need to rehabilitate. It's worth it.

    Two things: after rehabilitation, the collection costs and accrued interest
    will be "capitalized" and added to the loan. The final amount will become your
    new prinicipal. Therefore, the post-rehab principle amount will be higher than
    your original prinicipal. But it is all WORTH IT to get out of default and to
    have the negative entries taken off your credit report.

    Also: re paying on time for 12 months. Tear out 12 checks from your wallet
    and VIOD them. Give the collection agency the 12 check numbers over the
    phone or photocopy the checks and then send them in (signed, of course).
    Let the collection agency handle depositing the checks on the proper dates
    and you won't have to worry about being late.

    With the rehabilitation option, the government has really given defaulted
    students a very generous second chance.


  4. Aux

    Aux Well-Known Member

    To : Merci


    My husband chose rehabilitation option starting from January 2001. I was wondering If 12 months past, should we ask for the paper or anything in writing from collection?

    I don't see any collection record on his credit report yet.

    Also, after 12 months past, Can we pay the principle to the original loan (college) in one time. It's only $600.00 principle.

    Thanks in advance.
  5. marci

    marci Well-Known Member

    Re: To : Merci

    The collection agency should have sent you a rehabilitation "enrollment" form,
    which you would have signed as your agreement to enter the rehabilitation program
    at the beginning of the 12 months. In the 11th month, you should receive a letter from
    the collection agency that you are eligible for rehab. At the end of the 12th month,
    ask for a rehab "contract" from the SERVICER of the loan showing your new principle, etc... which you will sign and return to the servicer.

    The loan will be sold to a new servicer, and "reinstated". You should receive and make
    copies of: the rehab agreement contract, the rehab/reinstation confirmation, the letter
    to have all derogs deleted from the CRAs, and the new loan statement from the new

    As soon as the new servicer gets the loan, you can do whatever you want with it as if it
    is a brand new loan with no prior problems. You can consolidate it to another servicer
    or you can pay it off - since you are out of default.

    In my own situation, I did almost all of my talking with the guarantor agency. I had
    problems with the collection agency, as one collector basically lied and said that I was
    ineligible for rehab. After that I spoke with the guarantor who then communicated with
    the collection agency. I wrote all that to say this: you may want to talk with whoever
    services your loan (not the collection agency) to make sure THEY know that you are
    rehabilitating and that you get the proper forms sent to you from the collection agency.

  6. marci

    marci Well-Known Member

    Re: To : Merci

    By the way,

    it's Marci, not "Merci".

  7. Aux

    Aux Well-Known Member

    Oops! sorry my mistake

    Oops! sorry my mistake, I misspelled your name. Please forgive me.


    My husband did sign the agreement which have sent by his college and after he signed it, they sent him back one copy and sent one to collection agency. He has never talked to collection agency. It's the Perkins loan.

    Thanks a bunch for your input.

  8. marci

    marci Well-Known Member

    Re: Oops! sorry my mistake

    You are very welcome. I hope things go well for you and your husband.

  9. roni

    roni Well-Known Member

    Rehab must be in writing.

    Everything said so far is correct and I agree. I must also emphasize, that your hubby is not in rehabilitation unless he has a written agreement between the original lender and himself. Get that straight quickly.


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