I am sort of a newbie to these boards. I was an active member about two years ago while purchasing my home and haven't posted since. But now I need some advice since I have screwed up my student loan. Finally made the call about my SLs that have defaulted. SLs are in the $50,000 range but with collection fees and interest are up to $75,000. HESC advised me of my options which include making a $900 payment that I can't afford or sending in income documentation to get the payment reduced by half. I was advised that if I make three payments (at the reduced amount if accepted) then I will be eligible for consolidation. What I am wondering is if I want to rehab do I have to do it before I consolidate or after. I was told that my payments would be more managable if I consolidated, but the rep was not clear about the rules of rehabbing.

Also, are collection fees reduced if loans are consolidated or rehabbed? This would make a huge difference in payment options.

Is the Student Loan reporting?

I haven't checked my reports recently to see how it is reporting. I do know that the original lender had been reporting to only one agency.

How long has it been since you paid on these? were they in default when you bought your house?

They were not in default when I bought the house. The loan was up-to-date when I purchased, but shortly after I fell behind on the payments because of some extra medical bills and the original lender would not grant a forebearance.

Also, now I am told that HESC has sent a letter of intent to garnish to my employer. Did I read correctly on here that I have some time period to appeal this before they begin garnishment? I also want to talk to them today and know exactly if I need to rehab before I consolidate or vice versa.

I'm still unsure if I need to wait until I consolidate till after rehab. Can anyone tell me for certain which comes first consolidation or rehab.

For maximum credit report mileage, you will need to rehab first. Consolidation will not do anything for you, except create a new loan.

Thanks TX!! I definitely want the credit report mileage.

Pretty sure you need to rehab first as consolidation "opens" a new loan and closes the ones that need rehab but I'm not 100% sure. Consolidation will however lower your bills as you can probably get a 30 year payment plan with first 4 years at a much lower payment with a 75k Student Loan bill. Not to mention you can lock in an interest rate.

[quote name='rb22982' date='May 2 2006, 11:25 PM' post='1471626']
[I'm still unsure if I need to wait until I consolidate till after rehab. Can anyone tell me for certain which comes first consolidation or rehab.
[/quote]
Pretty sure you need to rehab first as consolidation "opens" a new loan and closes the ones that need rehab but I'm not 100% sure. Consolidation will however lower your bills as you can probably get a 30 year payment plan with first 4 years at a much lower payment with a 75k Student Loan bill. Not to mention you can lock in an interest rate.
[/quote]

Understand that if you choose rehab you will lose out on the current lower interest rates b/c the rates are jumping to 6.8 on stafford loans (currently 6.1) on July 1st. Possibly the interest rate doesn't matter to you. I went through rehab last year and went back and forth on whether to ditch rehab and consolidate before the rate hike. My loans went from 4.1 to 6.1% and I'm still debating whether I made the right move. If I had known the rates would jump that much, I would have consolidated. With smaller loan amounts it doesn't matter, but on big loan amounts it does make a difference.

Also, all rehab is not created equal. Even though the requirements for the borrower are the same and it appears everyone in rehab gets the same deal, collection costs on certain loans stay with you and some loan collection costs are removed for borrowers. Some negative notations get removed but others are not legally required to be removed. So, you have to weigh that. When I first entered rehab, I thought "great, this really is a second chance, I get my collection costs removed and start with a clean slate". I was really grateful, then I discovered that my collection costs stick and some negative notations on my CR remain. The collection costs just get added to the to the loan amount which you will pay back at a higher rate.

However, as other posters have informed you, rehabbing will clean up your credit reports. BTW, my loan company advised me to consolidate unless I was considering a large purchase such as a home or car in which case I needed a good credit report. In your case, you already have a house.