Rmv default sch loans from CRAs

Thomas,

You're correct, you cannot rehab until it goes into default. But you also haven't lost many benefits that those of us in default have lost.

If you are not in default, consolidation is a less risky option than defaulting on purpose to rehabilitate a lone. Even if though it doesn't clear your record.

Defaulting really sucks, even if you rehab. I can't answer how the old loans will report after consolidation; but a default really smells up your report.

Furthermore, defaulting in order to rehab could ultimately make things worse, like if something bad happens and your rehab gets screwed up. You don't get a second chance. It's like jumping in a fire to get dry.

I have read that others have had some luck removing derog information from student loans. If it were me, I'd negotiate the removal of the old information and consolidate with the original guaranty agency. Some folks may be doing this and calling it "rehabilitation." However, the term is technically specific to defaulted loans.

Although negotiating this may be tough. Your leverage to get the derogs off is minimal. While you still have to live with the derogs, Their are clear benefits to consolidating even if they do not remove the negative info--such as the lowest interest rate ever, and possible longer terms.

30ft

 

Thomas,

You are right. It actually helps you in the long run to default 1st than rehab. To often a person consolidates but that neg. stuff stays on your report whereas with a rehab it dissapears.

 

This is my impression of this:


If you are behind in payments on a school loan (but not in default!!!) try to get an agreement with the loan servicer to help you out by deleting the the late pays if you continue to pay ontime (somewhat like a goodwill letter) You do have several rights that you do not have once it get into default, one of them being you might possibly get them to do a retoactive forebearance.

Now if they give you the cold shoulder, then you will probably be better off (I know this sounds rediculous) letting it go to default. Then go right ahead and rehabililitate the loan for 12 months.

-Sal

 

Re: Rmv default sch loans *UPDATE*

I rehabbed my first student loan back in 2000. They tacked on a $1,500 "collection fee" onto my balance and capitalized it into the principal.

Has anyone else who's rehabbed had this happen. If so, did you get it removed?

Sirrowan

 

Re: Rmv default sch loans *UPDATE*

The collection agency was OSI. Yes, I think that the process is different for consolidating than rehab. You cannot consolidate if you are in default. You have to wait until after rehab.

 

Re: Rmv default sch loans *UPDATE*

With most consol. companies, you can't be in default to consolidate. However, I remember getting letters from a consolidation company that said they would consolidate defaulted loans. Not sure how true this is, I just thought I'd share the info.

I have a question about rehab. When you default, and the loan goes to the Guarantor, the Guarantor and the Servicer can list it as in default/collections (although the servicer should list it as transferred/sold as well). Now, when you rehab, I understand the Guarantor will remove the default from the CRAs, however, does the servicer have to remove that as well? I just can't seem to find where it states that the servicing co. has to remove their negative trade-lines as well. Any thoughts on this?

 

Re: Rmv default sch loans *UPDATE*

That seems right, however, when the Guarantor gets the loan, it (in effect) becomes a "new loan". I just don't see why/how a servicing corp. would be forced to change their trade-line. (for example, with "regular loans", if a loan is charged-off, it can be sold to a CA. The OC can (and often does) report it as a charge-off, $0 balance. The CA can also list it as a charge-off, but with the balance. Just because you get the CA to remove their trade-line through validation/negotiation, doesn't mean the OC has to remover theirs. I think...)

Now, I'm not saying servicing corps don't/won't change their trade-line. But, what if you're in a situation where the servicing corp. is playing hardball and won't remove it? I just don't see any real backing to get them to remove it if they don't want to.

I'm not in this situation, but I'd love to get some clarification on this type of situation. It would probably help to know either way when advising people whether to rehab or not because right now, all I can say is, "the servicing corp. *should*/*might* remove the baddies after you rehab." Thats just not good enough when people are trying to decide what direction to take.

 

Re: Rmv default sch loans *UPDATE*

I thought I would jump in, my knowledge is limited, but it may help.

Because I went to two different schools and had both Stafford FFEL and Direct loans, I had two situations to deal with. Both Defaults.

The non-Direct loans were rehabbed this Summer. It was a 18 month process that was not particularly easy nor beneficial for me. The Direct loans were still in default. After several months of research, and this is what I've done:

First I rehabbed the non-Direct loans (held by PHEAA, previously serviced by Eduserv Technologies and Sallie Mae). Once the non-Direct loans were rehabbed I looked into consolidation. My Direct loans were being garnished from my check with seemingly no way to end it. Although I found a way.

In fact, I just consolidated a defaulted direct loan through the Dept. of Ed (it funded Monday), so I know you can do that; however, you must consolidate via the "income contingent" repayment plan. After three months, you can change to any plan you like. The CA didn't know about this, and the no one that I talked to on the phone knew either. I found it on the dept. of ed site (www.e.gov). While other companies offer an income contingent plan, I don't know of any that allow you to conso a defaulted loan

Here's why I did it the way I did:

I just recieved an e-mail back from an ombudsman at the Dept. of Ed. She said that the laws governing FFEL loans only regard the servicer of the loan (Section 682.405 (b) of 34 CFR (b)(2)). For this reason, Sallie Mae had no obligation to remove the default marks from the report. Furthermore, that the positive trade lines on the report would be a possible counterbalance to the negative lines.

She also said that the HEA is up for reauthorization this year, and that this is a topic that needs to be discussed. For what that is worth.

My initial response was that if the default does not come off from all who serviced the loan, then rehab is no more compelling of a benefit than consolidating. No further reply from her as of yet.

Therefore, I consolidated the Direct loan in order to stop the garnishement. The info hasn't gone to the CRAs yet, but when it does, I'll post the results.

In regard to the Sallie Mae listings, I have PFBed Sallie Mae and received a reply on Monday that they are researching, but no resolution as of yet. and non expected.

Eduserv Technologies is now called EFG Technologies. I disputed their listings with Ex and they came off. I'm in the process of disputing with TU and EQ.

If you are considering rehab for a FFEL Stafford loan, I strongly urge you to read CFR 34.

30 ft.

 

Re: Rmv default sch loans *UPDATE*

From 30ft, " For this reason, Sallie Mae had no obligation to
remove the default marks from the report. Furthermore, that the positive trade lines on the report would be a possible counterbalance to the negative lines. "

This sums up what my feeling is on this. Although, some servicing corps. may be under the (probably mistaken) impression that they *do* have an obligation to remove negatives.

I still think rehab is good for those who need it. But it probably shouldn't be looked at as a "cure-all" for everyone. Especially since several people NOT in default have been talking about letting their SLs go into default on purpose in order to enter the rehab process. I just don't think its worth it.

Great find on the "income contingent" info 30ft! I knew their was some way to cosolidate defaulted loans but I couldn't remember how.

 

Re: Rmv default sch loans *UPDATE*

I don't remember who it was, but someone had spoken to an Ombudsman named Pam Moran, who said "in the spirit of the law" they should remove the information--which is how I look at it. It's a safe bet that this issue is one Ombudsman deal with often.

 

Re: Rmv default sch loans *UPDATE*

I don't think that there is a place where it says that the servicer has to remove the derogs. That's where I'm at with AFSA. They suck.

I also just read that the maximum collection charges that can be added to your loan are 18.5% of the balance + accrued interest at the time of sale (to the new servicer). Mine is way over this. I have a new animal to deal with.

Sirrowan

 

Re: Rmv default sch loans *UPDATE*

Hi,

This is a GREAT Thread. Like alot of you here, i'm having the same issues. My student loans went into default earlier this year and was sold to a collection agency. For some apparent reason, i was able to consolidate my defaulted loan with 6 straight on time payments. As of this month i am out of consolidation and back to the road of recovery. My main concern now are the tradelines and the damage that these loans are being reported. I was told by my CA that the loans will be updated soon and all the negative comments will be deleted. Too bad i didn't get that in writting...i think that will be a big mistakel. I've spoken to an individual from US dept. of education and they said they will update the report as PAID IN FULL, and account closed. I also have 8 other accounts (full own broken up to 8 different loans) all reporting 180+ late - collection account. These are the ones i want to tackle.

Can someone sent me a copy or sample of a NUTCASE letter that i can use? This is my only obstacle in trying to get a loan to buy a house.

I would really appreciate it if someone can help me. Thank you!

Eric

 

Re: Rmv default sch loans *UPDATE*

Sirrowan,

Did you re-hab your SLs that were with AFSA? If so, who added the additional fees, the Guarantor, old servicing copr, CA, or new servicing corp?

I'm guessing from your post that the old servicing corp (AFSA) won't remove the negative trade-lines, but, did the Guarantor remove their negs?

 

Re: Rmv default sch loans *UPDATE*

Erik said, "I also have 8 other accounts (full own broken up to 8 different loans) all reporting 180+ late - collection account. These are the ones i want to tackle."

Are these Student Loans, and if so, are they paid/transferred? Also, how old are they and who is reporting them (i.e., OC,CA etc)? Its hard to say what to do without more info.

 

Re: Rmv default sch loans *UPDATE*

Hi Scout,

Yes, these are student loans and that i have taken out during my time in school from 1995-1999. The loan is being reported by US department of education ADSF, i guess they are the original creditors. I really don't know what ADSF stands for, but based on what i read. It seems like ADSF are tough cookies. I'm currently out of default becuase the loan was consolidated. I don't know what to do next. Thanks for your help.

Eric