Saturday, March 22, 2014

Tackling the Student Loan Conundrum


     Student Loans are a whole other beast when it comes to dealing with your credit report. If you go late or you default on your loans, it's like the mafia sent a hit man out to kill your credit. I really don't understand how student loans weigh so much more negatively on your credit than any other debt, but they do. Every decent book that I've read about credit repair has designated its own chapter on the student loan issue and how hard it is to recover if you default on them. I personally have several student loans that are one of the mysteries of my credit score that I am trying to work out.

     I finished school back in 2008 right around the time of my separation with my ex-wife. There was a lot on my plate back then and I had to prioritize some things in my life. I needed a place to live, I needed to separate all the bank accounts and bills. My ex was not paying for any of our joint obligations, so I had to. I knew I had six months from my last course to start paying back the student loans, so I put the thought of paying on them on the back burner. I had time.

     Well, has anyone told you how fast time can fly? So much was going on with my life back then that six months felt like a blink of an eye. I had to deal with custody, visitation, and child support of my children, paying for my truck and all the other household bills with one income, working 12 hour days with a two hour round trip commute to work and back, and other personal issues that I'm sure you don't want to hear about. To say the least, I felt stretched extremely thin. I didn't know where to start dealing with all of the bills that kept pilling up, including my student loans.

     I tried to pay them at first. That didn't last very long. I started getting garnishments from all over the place. I couldn't stop them, so something had to give. My thought process was, "At least something's getting paid. I'm making some progress." But since 25% of my net pay was gone right off the top every paycheck for the garnishments, I couldn't afford everything. Not paying the student loans was my choice. I didn't think that it would affect me that much as far as credit scores go. I figured that I could get a forbearance or deferral until I could start paying them again. That worked once. For some reason I can't remember, I wasn't approved for another forbearance. I felt stuck between a rock and a hard place. The garnishments kept coming, the living expenses are always there, I needed a vehicle to get to work. So I finally gave up trying to pay them and just let them go.

     About 2 1/2 years ago I had finally finished my last garnishment. I was so excited that these other bills were done and paid for and I was excited for the future and ready to start tackling my student loan debt. I was too late. About two months after my last garnishment, another one started. I was so confused. I just knew those bills were paid for and I was ready to go off on somebody for making such a serious error.

     After calling my corporate office and getting the paperwork, I found out that it was the government that was garnishing my student loans because I had defaulted on them. I called them immediately and they explained my options. The best scenario for me was to rehabilitate my loans and get them back in good standing. I had to make six to nine consecutive payments on time in order for the government to rehabilitate the loans. I actually had to do this twice because I had government loans that were issued out by two separate companies. 

     One of the things that made rehabilitation so attractive when I was offered this was that my credit would be restored and the negative information would be taken off. It seemed like a win win for both sides. While I don't regret getting my student loans in good standing again, what I was told was either a bold faced lie or there is an error in reporting on my credit reports.

     After rehabilitating my loans they were issued to two different companies to service. This created more new accounts on my credit report which lowered my average age of the accounts. I was fine with this because they were in good standing again and, over time, I would be adding more positive information on to my credit reports. The problem I had, and still have, was that the old, defaulted accounts did not go away as promised. These accounts are the main reason that my score is still low today. While I was able to resolve most of the other negative information on my credit reports with little or no effort, these student loans are like thorns in my side that are in so deep that I will need major surgery to get them out. Still today when I pull my credit report and go to the negative accounts sections, I only see those student loans.

     I have disputed the defaulted accounts several times and the credit bureaus have stated that they have verified the accounts. They have gone so far as to say that my dispute with them about these accounts are now frivolous and that the will not investigate them anymore with more evidence to do so. I once disputed directly with the creditor (certified mail, of course) and got no response. After waiting the prescribed 30 days minimum for a response I sent another letter with all the documentation required to the credit bureau and still nothing has happened. This has been so frustrating that I have actually stopped focusing on those accounts for the past eight or nine months and have been focusing on trying to get more positive information on my credit reports.

     They have never left my mind, though. Now that I have put some separation between the flurry of activity disputing everything, including these student loans I will be starting a new round of disputes directly with the loan servicing companies.  I hope to force there hand, by submitting complaints to the FTC and other consumer protection agencies and, if needed, take them to court. I was promised something. I honored my side of the agreement. I feel they need to honor their side as well.

     And the Saga continues...