Wednesday, April 2, 2014

Student Loan Rehabilitation Law

     I just found a smoking gun to get these student loans off my credit report. You know what it is? You probably guessed it, huh? It is........ THE LAW! More specifically 34 CFR 682.405 - LOAN REHABILITATION AGREEMENT.

     Below is the law. I copied it from the Cornell University Law School website.
§ 682.405 Loan rehabilitation agreement.
(a) General.
(1) A guaranty agency that has a basic program agreement must enter into a loan rehabilitation agreement with the Secretary. The guaranty agency must establish a loan rehabilitation program for all borrowers with an enforceable promissory note for the purpose of rehabilitating defaulted loans, except for loans for which a judgment has been obtained, loans on which a default claim was filed under § 682.412, and loans on which the borrower has been convicted of, or has pled nolo contendere or guilty to, a crime involving fraud in obtaining title IV, HEA program assistance, so that the loan may be purchased, if practicable, by an eligible lender and removed from default status.
(2) A loan is considered to be rehabilitated only after—
(i) The borrower has made and the guaranty agency has received nine of the ten payments required under a monthly repayment agreement.
(A) Each of which payments is—
(1) Made voluntarily;
(2) In the full amount required; and
(3) Received within 20 days of the due date for the payment, and
(B) All nine payments are received within a 10-month period that begins with the month in which the first required due date falls and ends with the ninth consecutive calendar month following that month, and
(ii) The loan has been sold to an eligible lender.
(3) After the loan has been rehabilitated, the borrower regains all benefits of the program, including any remaining deferment eligibility under section 428(b)(1)(M) of the Act, from the date of the rehabilitation. Effective for any loan that is rehabilitated on or after August 14, 2008, the borrower cannot rehabilitate the loan again if the loan returns to default status following the rehabilitation.
(b) Terms of agreement. In the loan rehabilitation agreement, the guaranty agency agrees to ensure that its loan rehabilitation program meets the following requirements at all times:
(1) A borrower may request rehabilitation of the borrower's defaulted loan held by the guaranty agency. In order to be eligible for rehabilitation of the loan, the borrower must voluntarily make at least nine of the ten payments required under a monthly repayment agreement.
(i) Each of which payment is—
(A) Made voluntarily,
(B) In the full amount required, and
(C) Received within 20 days of the due date for the payment, and
(ii) All nine payments are received within a ten-month period that begins with the month in which the first required due date falls and ends with the ninth consecutive calendar month following that month.
(iii) For the purposes of this section, the determination of reasonable and affordable by the guaranty agency or its agents must—
(A) Include a consideration of the borrower's and spouse's disposable income and reasonable and necessary expenses including, but not limited to, housing, utilities, food, medical costs, work-related expenses, dependent care costs and other Title IV repayment;
(B) Not be a required minimum payment amount, e.g. $50, if the agency determines that a smaller amount is reasonable and affordable based on the borrower's total financial circumstances. The agency must include documentation in the borrower's file of the basis for the determination if the monthly reasonable and affordable payment established under this section is less than $50 or the monthly accrued interest on the loan, whichever is greater. However, $50 may not be the minimum payment for a borrower if the agency determines that a smaller amount is reasonable and affordable; and
(C) Be based on the documentation provided by the borrower or other sources including, but not be limited to—
(1) Evidence of current income (e.g., proof of welfare benefits, Social Security benefits, child support, veterans' benefits, Supplemental Security Income, Workmen's Compensation, two most recent pay stubs, most recent copy of U.S. income tax return, State Department of Labor reports);
(2) Evidence of current expenses (e.g., a copy of the borrower's monthly household budget, on a form provided by the guaranty agency); and
(3) A statement of the unpaid balance on all FFEL loans held by other holders.
(iv) The agency must include any payment made under § 682.401(b)(4) in determining whether the nine out of ten payments required under paragraph (b)(1) of this section have been made.
(v) A borrower may request that the monthly payment amount be adjusted due to a change in the borrower's total financial circumstances only upon providing the documentation specified in paragraph (b)(1)(iii)(C) of this section.
(vi) A guaranty agency must provide the borrower with a written statement confirming the borrower's reasonable and affordable payment amount, as determined by the agency, and explaining any other terms and conditions applicable to the required series of payments that must be made before a borrower's account can be considered for repurchase by an eligible lender. The statement must inform borrowers of the effects of having their loans rehabilitated (e.g., credit clearing, possibility of increased monthly payments). The statement must inform the borrower of the amount of the collection costs to be added to the unpaid principal at the time of the sale. The collection costs may not exceed 18.5 percent of the unpaid principal and accrued interest at the time of the sale.
(vii) A guaranty agency must provide the borrower with an opportunity to object to terms of the rehabilitation of the borrower's defaulted loan.
(2) For the purposes of this section, payment in the full amount required means payment of an amount that is reasonable and affordable, based on the borrower's total financial circumstances, as agreed to by the borrower and the agency. Voluntary payments are those made directly by the borrower and do not include payments obtained by Federal offset, garnishment, income or asset execution, or after a judgment has been entered on a loan. A guaranty agency must attempt to secure a lender to purchase the loan at the end of the 9- or 10-month payment period as applicable.
(3) Upon the sale of a rehabilitated loan to an eligible lender—
(i) The guaranty agency must, within 45 days of the sale—
(A) Provide notice to the prior holder of such sale, and
(B) Request that any consumer reporting agency to which the default was reported remove the record of default from the borrower's credit history.
(ii) The prior holder of the loan must, within 30 days of receiving the notification from the guaranty agency, request that any consumer reporting agency to which the default claim payment or other equivalent record was reported remove such record from the borrower's credit history.
(4) An eligible lender purchasing a rehabilitated loan must establish a repayment schedule that meets the same requirements that are applicable to other FFEL Program loans of the same loan type as the rehabilitated loan and must permit the borrower to choose any statutorily available repayment plan for that loan type. The lender must treat the first payment made under the nine payments as the first payment under the applicable maximum repayment term, as defined under § 682.209(a) or (h). For Consolidation loans, the maximum repayment term is based on the balance outstanding at the time of loan rehabilitation.
(c) A guaranty agency must make available financial and economic education materials, including debt management information, to any borrower who has rehabilitated a defaulted loan in accordance with paragraph (a)(2) of this section.
     I highlighted the part that will help me and all of you out there with this problem get this erroneous information off our credit reports. I really wish I had found this sooner. I guess a little bit of focus on a single problem instead of trying to fix all of the problems at once actually helps. 

     The problem I have, though, is that I was reading some feeds last night about people having the same issues that I am with these student loans. Some of the responses given to these people were crazy. One response said something to the affect that the reason one lady's negative student loans weren't taken off after rehabilitation was because the Department of Education was involved. He was insinuating that we can't do anything about it if the government does not want to do anything. That's just plain ridiculous. So, the law doesn't mean anything?

     Well, I'm an optimist. I believe that if there is a will, there is a way. I am drafting a letter tonight and will be mailing it out tomorrow. I will post a copy of the letter I sent on my next post. 

     There is one  more thing I feel I need to tell you that I also found out last night. I called the company on my credit report and asked why they had not updated my information with the correct status. The lady said that they have to get a notice from the loan guarantor in order to update my credit report. You see, the companies that show up on your credit report are your loan servicers. They take the payments for the government and report the data to the credit bureaus for them. You need to be talking to your loan guarantor. This company guarantees the loan to the servicer if you default. They are also the company you will be dealing with and making payments to during the rehabilitation of your loan. So you see it can be very easy to get confused and not know who to talk to. 

     Let me know if you have any more insights.

     And the Saga continues...