Just got out of default---now what?

[TreeFrog]

I defaulted on my student loans held with the U.S. Dept of Education. I made payments for most of a year under their loan rehabilitation program. Now, I just made my last payment under those terms, and am out of default. What happens now? Will my montly payment amount go down? My payment for rehabilitation nearly quadrupled from my original monthly payment before default. Will it go back to what it was before default? Or will I have to renegotiate another monthly payment amount? Any pointers, I'd greatly appreciate. Thanks a lot people.

[budgreen]

cases seem to vary, but I can share my experience since I have just gone through it.

I defaulted on 3 loans from sallie mae some years back, and got the oppurtunity to rehab them.

1.) defaulted on the loans from sallie mae.
2.) completed rehab through usa group (now sallie mae i believe)
3.) sallie mae reopened (bought) the loan as current and consolidated the 3 into one with direct loans. currently at the same payment rate I had before, but I pay extra when I can.

now the mess it left!

the 3 old defaulted loans are still reported negative, it still shows the late(missed) payments before they defaulted but the status of the loan is "paid or paying as agreed" and the status is "debt is being paid through insurance"

the same 3 are reported positive from the rehab period "paid or paying as agreed" and the status is "closed"

and the new direct loans consolidated version is the currently open loan I am paying on.


it's a mess!

[TreeFrog]

Thanks for your reply. Perhaps consolidating after default was a mistake, and doing so basically opened up a new loan, and closed the other ones. I consolidated years ago, soon after graduation. So, that won't be an issue now. So, hopefully, I get to keep my old payment plan (I plan to pay way more on than the minimum too, on a regular basis--want to get these things paid off within a year!) and the current default status just gets replaced with paying, and I can stay in good standing and rehabilitate my credit. Thanks for your help. I appreciate it.

[budgreen]

i'm wondering if one set should go away? haha 3 neg, 3 pos, and 1 current. all the same, but all with different account numbers.

also debating on paying it off or keeping it for payment history, i have very little debt.

[budgreen]

After some questioning, the origional/updated set of loans has been removed from eq and ex, just waiting on tu now.

[lilbylil]

Originally Posted by TreeFrog

I defaulted on my student loans held with the U.S. Dept of Education. I made payments for most of a year under their loan rehabilitation program. Now, I just made my last payment under those terms, and am out of default. What happens now? Will my montly payment amount go down? My payment for rehabilitation nearly quadrupled from my original monthly payment before default. Will it go back to what it was before default? Or will I have to renegotiate another monthly payment amount? Any pointers, I'd greatly appreciate. Thanks a lot people.

Similar story in my case. Completed rehab a few months ago. USDOE then sent my loan back to Direct Loans from whom, after signing up on their loan servicing website to make payments online, I was able to pick from a number of payment plans, online (did not have to talk to anybody and it took about five minutes), and supposedly I can switch to any of the other available plans at any time. My monthly payment now is a little more than half of what it was in rehab.

[lilbylil]

Originally Posted by budgreen

cases seem to vary, but I can share my experience since I have just gone through it.

I defaulted on 3 loans from sallie mae some years back, and got the oppurtunity to rehab them.

1.) defaulted on the loans from sallie mae.
2.) completed rehab through usa group (now sallie mae i believe)
3.) sallie mae reopened (bought) the loan as current and consolidated the 3 into one with direct loans. currently at the same payment rate I had before, but I pay extra when I can.

now the mess it left!

the 3 old defaulted loans are still reported negative, it still shows the late(missed) payments before they defaulted but the status of the loan is "paid or paying as agreed" and the status is "debt is being paid through insurance"

the same 3 are reported positive from the rehab period "paid or paying as agreed" and the status is "closed"

and the new direct loans consolidated version is the currently open loan I am paying on.


it's a mess!

After defaulting and then completing rehab on 5 USDOE loans my credit score with Experian jumped over 70 points. However, for some reason the defaults had never been on my Experian report. Was not so lucky with Transunion and Equifax.

Within a few weeks of completing rehab, the USDOE rolled the 5 loans into 1, knocked about $10K in fees off the total balance, and sent me a nice letter in their standard, all caps style congratulating me on completing rehab. Their letter also said that, because I completed rehab, they would be notifying all three of the national credit reporting bureaus to remove any previous negative reporting regarding my student loans. This is consistent with what I was told going into rehab.

My Transunion and Equifax reports are still a mess though. They show my "new," single loan balance as current, with pretty trend lines full of OKs like Experian's; however, they also still show the original five stinkers, with different account numbers (the account number for the "new" loan now appears to be my Social, based on the last four digits, which, as with the other account numbers, are the only digits shown), and nasty words like "Closed," and worse. In fact, one of the five shown on the Experian report says, "Closed," yet the trend line for that one is full of OKs. Also, my total installment debt appears to be more than double what it is, because the five original balances (with fees that were tacked on during default) are added to the new one to get to my total installment debt number.

Every listed student loan item on these reports shows the USDOE as the contact, with the same phone number and address, although there are some variations in the contact spelling, for example, "US DEPT EDU" instead of "US DEPT EDUCATION." In other words none of the contacts listed for my student loan items are collection agencies.

I believe the Transunion and Equifax reports can probably be cleaned up but am not sure how to go about putting the wheels in motion. Disputing the old stuff with USDOE has crossed my mind, but I don't want to screw it up because part of me tells me I may only get one shot.

Something also tells me there are many more than us in similar messes.

[budgreen]

removal of negative reporting seems do be changing default status to pays as agreed, the late pays stay with it, and still hurt.

if your persistent you can get them to remove the late pays or get the accounts removed as duplicates, eq removed late pays, ex deleted them alltogether, tu no change yet

everyone seems to have different results

[lilbylil]

All fixed now, hooray.

Earlier I forgot to mention, in addition to receiving a letter from USDOE after completing rehab, also receiving a letter from Direct Loans, after the now-consolidated loan went back to them for servicing, stating they would also notify all three credit reporting agencies to remove any and all negative information related to my federal student loans.

In any case, since my last post I decided to dispute all negative student loan credit report info online with Transunion and Equifax (there was no need to dispute anything with Experian, because they didn't have the "old" loans on my report to begin with, and once I came out of rehab they reported the "new" loan with a healthy trend line as soon as I made my first payment with Direct Loans). While Transunion, within a few days, deleted the negative info on the "old" loans (even the old account numbers and line items themselves) and updated the trend on the "new" loan and account number (which is now my social) to reflect a lengthy, immaculate payment history with no delinquencies, Equifax took a while (over 30 days), but ended doing the same.

All in all my credit scores shot up between 60 to 80 points each, depending on the agency, after rehabilitating (9 months) and then remaining current (now 6 months) on the "new" loan. What's nice is that, once the debt went back to Direct Loans, I was able to sign up with them online and pick from several very reasonable payment plans, between which I can switch at any time with a click of the mouse. Currently I'm paying $225/mo. on $48K of debt. (During rehab it was over $400/mo.)

Bottom line: Uncle Sam honored the rehab promise, and all three CRAs responded positively after no, or very little, prodding.

[kacey]

lilbylil, Thank you for posting this info. I just got done with the rehab, now I am waiting on the USDOE to get done with updates to their system so I can go back to Direct Loans. My CR is so messed up over this and I am hopeful it gets straighten out after they go back to DL. Very glad everything woked out for you.