Hello!
First I want to say thanks to all of you who have made this board such a tremendous resource for people like me! I have spent the last 3 days pouring through the threads and reading stickies! Without all of the info I have learned, I never would have been able to make the progress with cleaning up my credit that I have in these short 3 days! Truly! So THANK YOU!

Quickly, here is a little background. I have defaulted student loans in the amount of 13,000 (including interest). The last reporting date was March of 2001. I have not lived in the states for nearly 6 years, and they have not been able to garnish my wages, even though my social is flagged, due to international laws. I am a Norwegian resident with a Norwegian 'social security' number working for a Norwegian company.

We most likely will move back to the states in a few years and I want to have my credit cleaned up in hopes of securing a good home loan. I pulled all three reports and they are fairly dismal. EQ and TU are 588 and EX is 599.

After reading everything on here, I finally called Texas Guranteed last night and 'came out of hiding' so to speak. It was actually a lot less painful than I had anticipated! Because of what I learned here, I knew that I did NOT have to pay 20% of the balance to get back on track and I think my 'handler' was a bit surprised when I quoted the law back to her regarding that!

Enough rambling! Sorry! So here is my question...She said she felt the best option for me was to consolidate thru the DOE. To make a good faith payment to get it out of default and out of TG's 'stable' and over to the DOE by December. At which point they would mark it as paid and get it off of my reports.
After reading on here, I told her I was more interested in the rehabbing option due to the positive benefits it would have on my credit scores, as my ultimate goal was to improve those scores within the next 2 or 3 years.
She said that she felt consolidation was still my better option because my student loan defaulted in 2001, so the 7 year SOL had passed and as soon as I got it out of default, it would come off of my credit completly, so I wouldn't get the benefits of a rehab anyway because the old defaulted loan wouldn't be on there anymore due to its age. There would just be a new TL from DOE showing on time payments....

So, I need to know if she is correct?? What is the best option for me? Because of the age of the student loan, should I just consolidate or should I go thru the rehab process? Again, for me, the most important thing here is NOT repaying the loan, but my FICO score in 2 years. Being an upstanding citizen who repays student loans is just a benefit!

I need to make a decision in the next few days, so any advice is greatly appreciated! Thank you so much!

Generally students loan TLs that are bad can stay on bureaus for life if they push the issue since there is no SOL on them. I personally myself like the DOE option and you can use forebearances forever practically.

Thanks Hurricanesfan...

So really, there are no significant benefits that outweigh one option or the other with a loan this old? I am not interested in forbearance and there is no way I could qualify for financial hardship with my AGI and tax returns. I just want to pay them off and get on with my life!

My 'handler' mentioned that they would send a letter the the CRA's requesting that the negative TL's are removed. Should I get that in writing? It is Texas Guaranteed and I wonder if there is a history of them on this board and how they behave after consolidations and rehabs??

So, we are leaning towards the consolidation at this point...

Another option is this: Since living in Norway, I have become an upstanding citizen with stellar credit. I have several Amex cards, car loan, mortgage ect. I could take out an unsecured loan and just pay off the student loan in the states and have the debt as a loan in Norway with basically the same interest rate (8.25%). I guess the only benefit is not messing with the DOE...and forgoing all of the paperwork with personal details. What do you think of that??

Thanks!

The reporting time frame on student loans is exactly the same as any other tradeline on your CR. Collection SOL, however, has no limit. Loans in collection for too long can be called back by the Dept of Ed, creating a brand new, defaulted tradeline and this can happen at any time.

My suggestion - consolidate and let the old lines fall off due to age. At worst, if they don't just fall off when they are supposed to, you can always dispute them as obsolete.

As Krzywon indicated, there's no statute of limitations on federally guaranteed student loans. The gov't can bring a claim at any time (although, you actually have to work at getting sued -- it happens, but it isn't particularly common). And they will snag any tax refund you might otherwise be entitled to when you get back to the states. Which can be a real nuisance.

But ... if there's been no activity on the loan in more than 7 years, it should have dropped off your CR. (I discovered this myself when I was dealing out my last student loan and learned that I actually had a 718 credit score -- while still in student-loan default).

Which brings you to back to how to handle the matter. Rehabbing the note *might* bump your credit score -- but a quick glance at TG's website shows that their "rehab" option has been suspended for the moment (the economy and all). In any event, the easiest (and probably cheapest) way to do it is to settle for a hard number.

Take a look at that 13K figure again. Often that number breaks down to "Principal," "Interest," and "Penalties."

The rule here is that they will never negotiate the principle, they'll generally settle interest at 50% ... and don't even discuss penalties. "Penalties" aren't collectible unless someone is crazy enough to pay them.

In talking to these folks, don't "admit" anything -- just discuss what you are willing to consider doing to resolve the matter. Be calm, be businesslike, and never show fear or concern. This is just a business transaction.

And whatever you do -- get EVERYTHING in writing -- particularly before sending anyone so much as a penny.