Hi Reddit Fam,
I need some advice! So my student loans have been in default for years, I’m talking to the point where they no longer affect my credit score. Yes, I know they are still there, but they aren’t on my report.
I withdrew from school in 2013.
Once I saw wage garnishment was back on the
table, obviously panic ensued.
I called Dept of Ed and was sent the information to file for loan rehabilitation. I filled out the paper work and my payment is $5 a month for the next 9 months get back in good standing. I felt relief!
But NOW, of course I’m on social media reading about how outrageous loan payments are- $700-$1000 a month?
So here is my new fear- once I make the monthly payments of $5, I’m back in good standing and the loans go BACK on my credit report. If my payment would be hundreds of dollars, I can’t afford that and would be at risk of default again and then I’m back to shit credit for 7 years.
So- is it really worth being back in good standing?! Should I just wait for them to garnish 15% of my paycheck and keep this off of my credit? 15% of my paycheck would be $195 twice a month. Still would require me to get a second job part time, BUT not more than my mortgage payment?
And I’m sure everyone is thinking that my payments wouldn’t be much since I got in the rehabilitation program for $5 a month, BUT that’s only because they took my monthly bills into consideration. I’ve read other payment programs once you’re in good standing do NOT.
I am in no way saying these don’t need to be paid back- just tying to figure out the best option longterm regarding my bank account and credit score.
Thank you! I appreciate any advice or personal experience.
Is loan rehabilitation really the best option?
byu/cantstandyabits inStudentLoans
Posted by cantstandyabits
3 Comments
Standard repayment only takes your loan balance into consideration. That’s just the amount to pay your loan in full, including interest, over a set timeframe. There are IDR repayment options that use your income to determine the payment amount. It sounds like that may be a good option for you to look at, but you’d need to look at your loan balance, principal balance, and interest rate to know for sure.
Have you checked to see what your payment would be on an IDR plan? It would likely be less than garnishment (but more than $5.)
I believe if you do an IBR it only goes off of 10-15% of your income, so no sense getting garnished 15% when you could have loans in good standing. If you ever plan on getting a mortgage, these arent hidden simply because they are not on your credit reports, trust me, derogatory federal student loans are held against you and can be found in a search. I did a lot of rehab with my loans over the years. Of the 3 sets, 1 set I did the fresh start program around a year ago (no longer available) and I wish I had done it for all 3 sets, as those actually do stay off the credit reports if they aged off already (which all mine had). These large payments you are seeing are for people with higher incomes and larger loans.
Regardless, if you already signed up for rehab, they will be placed back on your credit and would have to wait for default and the process of garnishment.