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ArsenalFan

Can Dept of Ed Deny rehab on eligible defaulted loan?

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I will try to make this short. Back in February I received a letter from DOE about a 14 year old defaulted Perkins loan in the amount of $2,000. After interest the current amount is $3,290. I called to ask about loan rehab and was told to send in my financial disclosures. I did and was offered a monthly plan of $401. This monthly would pay off the balance BEFORE 9 months and thereby not hit the rehab stage.

I called back (and sent a letter) asking for a more reasonable $200 monthly payment. They essentially told me that the decision was solely based on income and that it likely wouldn't go down. Im unsure on what to do...can they essentially deny you the loan rehab option in this way just because of your income? I would like to receive the credit benefits of rehabilitaiton instead of paying off the balance before 9 months and thereby not receiving the credit restoration benefit of rehabilitation.

Thanks for any insight!

 

 

PS: I was unaware of this loan and never received correspondence on it for the past 14 years. I still have gotten any documents signed by me that this loan is valid. Should I try disputing to CFPB since they will not agree to a loan payment that satisfies the loan rehabilitation requirements?

Edited by ArsenalFan

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If you defaulted on it 14 years ago, is it on your credit report? If not, there wouldn't be any credit bumps anyway. Even if it is, the only thing rehab does is remove the default notation. Basically, if you have the money to do so, pay off the loan so you don't have to worry about it anymore. Then worry about how to remove the credit reporting.

 

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If you defaulted on it 14 years ago, is it on your credit report? If not, there wouldn't be any credit bumps anyway. Even if it is, the only thing rehab does is remove the default notation. Basically, if you have the money to do so, pay off the loan so you don't have to worry about it anymore. Then worry about how to remove the credit reporting.

 

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Thanks for the response! It has never been on my credit report, EVER...until now. It just popped up in Feb of this year. The weird thing is it doesn't even show as default per se....it shows as a closed account that has a 60-180 day late payment (it does not show when the late payment was). It is very vague how it is reported on my CR--does not show at all on 1 bureau and is reporting slightly differently on the other 2.
I'm worried that if I pay it off (vs rehab) that it will report negatively for the next 7 years. I've worked super hard to have clean reports so this would not be ideal.
Edited by ArsenalFan

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Do you have paper reports directly from the CRAs? If not, you need to get those asap, so you can see exactly when it defaulted. I know Perkins loans are even more different than the standard sub/unsub federal loans, so Im not sure if they can continue to report until it's paid off, but they might be able to. I would contact the servicer to see if they will remove the reporting once it's paid off. If not, once it's paid, you still might be able to dispute it with the CRAs as obsolete, depending on when the DofD is. You will need your current paper reports to verify when that was.

 

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They can and will garnish your wages and income tax refund without notice. Your best bet is to try and get it rehabbed or payment plan to pay it off. I believe after 7 years it drops off your credit report but federal student loans have no statue of limitations.

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Was the loan originated or defaulted on 14 years ago?

 

But yes if you can afford the payments based on your income they can deny rehab for a repayment plan.

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