They tried to make me go to rehab, I said "OK."

January 12, 2012 2:19 PM

Seeking experiences of people who have rehabilitated their defaulted student loans through a collections agency. Did they try anything tricksy? If, like me, you had a FFEL loan and they sold it, how long did it take? And what happens once you're out of rehabilitation -- did your credit history/score improve, if so how long did it take, and what are the steps of moving to something like an Income Based Repayment plan or some other method of reducing your payments? Any help appreciated!
posted by El Sabor Asiatico to Work & Money (5 answers total)

We rehab'd my husband's very defaulted, very big loans by committing to pay a pretty large sum per month - $400, I think - for nine months running. After that, a large percentage of his total debt that had been made up of fines was forgiven. I'm afraid we haven't checked our credit history/score since then, since I'm a little phobic about the whole thing and we will be able to buy a house when pigs fly, but we were able to get into an income based repayment plan. For his various loans, we pay about $180/month.
posted by PussKillian at 2:59 PM on January 12, 2012

Response by poster: PussKillian, what was the process of getting into the IBR plan -- was it offered to you, or did you have to contact the Dept. of Education? I'm a bit cloudy on that transition process and what it "looks like," so to speak.
posted by El Sabor Asiatico at 3:04 PM on January 12, 2012

I rehabbed mine about 12 years ago, so my memory is a bit fuzzy, but yes they offered me the repayment plan where after a certain number of on-time payments they considered the loan rehabilitated. I can't remember if they removed all the black marks from my credit report right away or if I had to wait the 7 years for them to drop off on their own. They're definitely gone now and have been gone for a long time.
posted by rabbitrabbit at 4:33 PM on January 12, 2012

I can't answer the long term questions but I defaulted on my student loans about 2 years ago and just yesterday I called the debt agency that has it ready to find out what I needed to do to get it back to non default status. I am in a better financial state so I felt like I was ready to just find out what the next steps were. They took my income information, and gave me three options to pay them back, all required a lump sum payment ( the range was between $550-$900) and the commitment to pay monthly- they will take it out each month and there were three payments based on the down payment( $150ish if I paid $900 etc). It was all so nice and straight forward I decided to take care of it right then and there. I choose to pay the lowest lump sum and the highest monthly. Compared to scummy collection dealings I've had, I felt process was easy and the guy I talked to was really nice and professional- (I'm used to being made to feel like a horrible person by most debt collection companies). I was told that in 6 payments/ months I will be eligible or federal student loans and in 10 payments/months the loan will return to a "normal" loan status - though not necessarily with the original loan agent. A friend who had defaulted for over 10 years had a similar experience but he was only required start paying, he didn't have to pay a lump sum and he isn't doing auto payments. So I think the process is pretty straight forward.
posted by momochan at 4:55 PM on January 12, 2012

I agree that we actually got treated with a decent amount of respect in the process - not the horrible humiliation of the average debt collector. I'm not entirely clear since it was about three years ago, but I think I actually asked what our options were once the loan was rehabilitated, and they told me where to find the forms. We may have been put into a repayment plan that wasn't the income-based one and I had to officially switch us over.
posted by PussKillian at 7:49 PM on January 12, 2012