Student Loan Default: Paying in full vs Servicing debt?

[mojokitty]

Hello all,

 

This is my very first post on any forum anywhere! I just turned 30 on Monday and this is what I'm doing now, lurking and posting on credit forums. LOL! I have terrible credit. My EX reports 5 baddies and 0 positives. My FICO is in the high 520's. I am still yet to pull other CRA reports. I am very excited about embarking on this journey to fix my credit.

 

I have a defaulted SL. Last year I had my tax return intercepted and now its time to face the music. I have a few questions before I arrange payment. The owed amount is around $2500 I don't have an exact amount yet because different places are reporting different numbers. I'm looking to build some positive TL on my report, what is my best course of action?

 

1)Pay debt in full? Will that count as rehab or settled? Since it is with an CA will that effect what the Dept of Treas is reporting?

 

2) Rehab the loan, and pay in full before the loan is sold? (To minimize fees)

 

3) Rehab the loan and take my lumps (18.9% APR, 16% CF) then service the debt to increase positive reporting while using my extra money to build credit through other means?

 

I make <20K a year so there is not much to go around as of now. I am in no rush to buy a house or car but definitely would love to do so in a year or 2 (or 3). Any responses would be appreciated.

 

Peace,

 

T

[Deadbeatloser]

There are people here far smarter than me but I would say rehab the debt and go with an income based repayment. That way you can establish positive tradelines. Old negatives don't really help you. even if they're PIF.

[mojokitty]

Thanks for the advice Deadbeat. Does anyone know how to get hodap or LynnMN's attention?

[hodap2001]

Have you contacted the collection agency? They will let you know if you are even eligible for Rehab since you have such a small amount owed - it's basically $300.00 a month for 9 months and your loan would be paid in full and there would be nothing to be rehabbed. MY recommendation is to pay the loan off in full, unless the collection agency does offer you rehabilitation.

 

Good luck!