My wife has a defaulted student loan. She wants to go back to school, preferably winter quarter (starts January 2008.) At the same time, she would like to remove the negative status from her reports.
Is there an option that allows both of these things to happen? Ive looked into the loan rehab, my understanding is that payments will need to be made for several months before she is eligible to regain federal financial aid. Is it possible to get federal aid while you are rehabbing a loan?
Consolidation looks to make it possible to go back to school sooner, with federal aid, but Im not sure how that will impact her credit reports. Anyone have any suggestions?

The loan is still with the Department of Education. That is the only creditor shown with the loan, no CA or anything. If she rehabbed with them, would the negative status change to positive, after the 9 payments, since it is still the original lender's tradeline?

Im very confused by the student loan stuff....
Lynn, what would be your recommendation in regards to this situation?

Who was her original lender? Was it through Direct Loans (i.e., through DOE)? If so, then her guarantor and lender are both DOE. CAs don't generally report for SLs -- the loan is still held by the guarantor; the CA is just retained to collect. Has she been contacted by a CA or is it with DOE's Debt Collection Service (DCS -- or something like that)? If she's been contacted by a CA, she has to deal with them for rehab, but the reporting issues are still with DOE. Does she know who is actually holding the loans or is she only going off of her reports? If it's the latter or if you aren't sure, she can find out on the NSLDS. If she needs a PIN or doesn't know how to access it, there's a sticky at the top of this forum. It will tell her where her loans are. From what I've seen (and this is general practice and NOT guaranteed, so YMMV of course!), Direct Loans, assuming that's who your wife's loans are with, are the best ones to have. They tend to delete all of the negatives after rehab.

Basically, she has two choices and there are pros and cons for both. She can consolidate or PIF right away and start school in January with new loans. The negative there is that the none of the negatives will be removed. Otherwise, she can enter rehab and wait until summer or fall 2008 term to enroll. The credit issues are obviously better here, but she wouldn't be able to start school until later, assuming loans are necessary.

Hope this helps!! Good luck!!

It is still with DOE, according to NLSDS. It reached default status Nov. 4th.
We are really having a tough time debating which way to go with this.........

of course, her education is important, and she would like to go back to school as soon as possible, but her credit will have a major bearing on our financial future......

Decisions, decisions........

So, even after successful rehab, the loan will still carry a negative status? But there will be a new tradeline for the loan that reports as current?

Wow! , good stuff to know I am headed in that direction myself although I was hoping DOE would do a PFD I would not rather have the TL as it is 11yrs old , than to have 11yr worth of neg and wait for it to fall off. By the way how long does it take for neg info to fall of a TL? As I understood it rehab is the best choice for prayer of neg removed and current TL then just PIF. YMMV

Reporting continues for 7 years from the date of default or the claim paid date. That is the only date that counts in student loans...DOFD does not count in student loan reporting. There is no way you would have 11 years of negative reporting at one time.

Just recently I had student loans on my report in 06 from 94 I still have loans from 98 when i graduated long since defaulted still on my report same TL reported twice and spread out into all the little loans I had taken over the years (19) CRA are animals but I let it happen so I deserve it. I Will fix it soon enough. I have the knowledge from cleaning up DW to proceed with speed.I cleaned up DW credit report by beating CA off her report (DV) and negotiating PFD. SL are are evil dey are da debil I should have pay by CC. Use all the 0% BT u can

You may have borrowed the loan in 94 but the only date that matters is the date of default....if you defaulted in 2005 it will continue to report until 2012 which is 7 years from the default date.

Yes you will have multiple tradelines....legally. However the lender/servicer will have a zero balance. The guarantor of the loan also will report with the current balance as a negative tradeline.

Good stuff! Thanks Lynn I am going to get my rear in gear and go for the rehab and pray for the del of neg hist. Once I get it back in current I am going to PIF. Then try to get CRA to delete it if neg info still remains. Hopefully DOE to busy to respond for PIF accounts

Only the negative information from the guarantor is deleted. The original lender remains reporting negative as required by law. Disputing it can cause the negative reporting to get worse...."oh he wasnt 120 days late, he was 180." DOE WILL respond...they are the feds and they follow the rules.

Rehab requires that you make 9 payments to qualify. You will need to contact the current guarantor...more than likely it is with a CA and you are required to work with them setting up the payments.

Since the original lender is the DOE in our case, it seems that there is nothing to gain by doing the rehab, correct? if the negative information will remain, would we be better just paying it off or consolidating, as opposed to doing the rehab?

ED will remove the default notation upon successful rehab.

Hypothetically, someone could get this:

SLM: Opened 1/1990, Closed 1/1993 120+ 120+ 120+ Government Claim Filed... on report until 2/1999

USAF: Opened 1/1993 Charge-off/Collection Account... on report until 1/2000

US Dept of ED: Opened 2/2002 Charge-off/Collection Account Balance $10,000 past due $11,876... on report until 2/2009

all for the same loan.

Is that going to make a huge difference, when there are multiple late payments still showing?

When I rehabbed my Direct Loans, all of my lates were removed as well. If I were you/your wife, I'd go the rehab route and put school off for 6 months if need be. In fact, that's exactly what I did myself when in the same situation

Do you know if thats the standard procedure? If so, then I think we will go that route.

Update- my wife called the DOE to inquire about rehab arrangements- THEY TOLD HER IT WAS NOT IN DEFAULT!!!!!!!!!! Said it had to be 360 days past due to be in default. Not sure what happened, it definitely showed "in default" as of November 4th. They gave her a deferrment, said she would be able to go back to school

Christmas miracle, I guess!!!

Default occurs @ 270 days past due. 371 is the last day to file a default claim. What deferment did she get, and when does it end?

this is a prime example of why i remain current on the repayment of my student loans.