I defaulted on my student loans years ago (over 7 years). Now I want to clean up my credit and repay the loans but do not know what is the best way to go. The latest letter from the collection agency (Education Debt Services, Inc. EDSI) listed these rounded numbers (the amount is reasonably correct): 1) Original loan amount: $ 9,000 2) Interest: $ 6,000 3) Fees & Costs (25% of P+I): $ 3,500 ====== Total $17,500 I believe I have 2 options (I ruled out Loan Consolidation): 1) Make 12 monthly payments and then rehabilitate. Afterward, payoff the balance in full. This way, my credit will be totally clean. An 18.5% fee would replace the 25% collection costs. Total payment ~16.5K. 2) Negotiate a lower lump sum payment through the Compromise program. Iâ??ve had ONE phone with EDSI and they offered a settlement of 80% or $14K. I have been avoiding them the last several months until I know exactly what to do. Obviously, I want to pay the lower amount. However, I am very skeptical about dealing with the CA. Iâ??ve read horror stories. Therefore, my questions are: 1) Has anyone been successful in negotiating a reduce payment amount? If yes, by how much? Iâ??ve read somewhere that if I repay the loan in full, in the best case, I can negotiate to: · waive the collection costs · waive up to 30% of principal and interest 2) Has anyone dealed with EDSI? What was your experience with them? Are they reasonably trustworthy? 3) Some people have mentioned that, although they have consolidated/rehabilitated their loans, their credit report still shows a zero balance with 120 days past due. This is so because â??paid in fullâ? only applies to the principal balance of the loan, not the collection fee. How do I avoid this situation? 4) Some people even mentioned about the â??PD â?? Paid (not in full) Principal Settledâ? notation. Is this a negative to credit score? It certainly doesnâ??t sound positive. 5) Any recommended lawyer/Debt Management agency to help with my situation? Iâ??ve called over a dozen of law/debt management firms and ALL said they donâ??t take student loan cases. At this point, I am leaning toward the rehab route since it seems to be the only reliable (and legal) methods of cleaning up my credits. Then again, I hate pay almost double the original loan amount. BTW, I talked to Dept of Education (the guarantor of my loans) and they insisted that I deal with the CA. They didnâ??t want to negotiate or rehabilitate my loans directly. Thanks for your help.
Hi Mark, Here is my opinion: Rehabilitate! Here is why. Once you make the 12 consecutive monthly paymens, by law the servicer must report loans as pays as agreed never late. This gives you so much leverage over the CRA. They MUST clear all past notations from your report and remove judgements (if you have them from defaulted student loans) I started my rehabilitation in December of 1999. I defaulted on my NDSL and my Stafford Student Loans. My loans were through PHEAA (PA Higher Education Assistance Agency). I rehabilitated my loans just before they went to a collection agency. My loans were in default for 5 years and never left the agency. Actually I lucked out. They just started garnishing my pay for 10%. I was resigning the position because I accepted another position. They only got me for 1 month. When I resigned, I called them, and advised them they would no longer receive payments via garnishment. The rep was polite and informed me I could rehabilitate with 12 consecutive payments. They sent the contract I signed it and began my 12 payments. True to their word, they sent me a letter telling me I completed my contract, and one month later, I received my credit reports and all my student loans were corrected. Mind you I had 24 tradelines of student loans. They removed all duplicate tradelines and every loan reads "paid/never late" Additionally, they sent me a copy of the letter they sent to the bureaus just for my files. So, I say, rehabilitate. It gives you a lot of leverage to have all the collection notations, late payments, and default status removed from your credit reports. Its the law, they must remove no question. just my 2 cents
Agreed. Rehab. I have had true errors on my piddling 4 accounts and I still have them on 2 reports. Student loans are notorious for not getting corrected through standard credit repair techniques. And, on Experian, previous neg notations on student loans tend to get always coded as CURRENTLY delinquent... meaning, your score is killed as long as the tradeline is there whether you know it or not. Rehab. Rehab. Rehab.
