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What to expect if I start to pay on defaulted student loan?


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I moved to Canada in 1999. I have lived here happily since then and have no intention of returning to the US to live. While attending university in the US, I received several federally funded student loans: 1994 - ~5000$, 1995 - ~5000$, and 1997 ~5500$. Collection attempts on the 1997 loan is limited to telephone calls to family and aquaintances listed as references on my student loans. No collection attempts have been made for the 1994 & 1995 loans for quite a number of years.

The first two (1994 & 1995) don't appear on my latest Experian credit report. The 1997 loan was passed from Direct Loan Service to the DOE and they are attempting to collect it. I would like to make payments on anything listed for collection in my credit report, but I'm uncertain about what to expect in the process.

I understand that there is no SOL for federal student loans, so I can't expect the loans from 1994 & 1995 to just disappear, but I have no information about those accounts (acct numbers, who holds them now, etc) by which I could proactively contact the collector to deal with the problem. If I attempt to start making payment on the 1997 loan, would the collectors of these prior defaulted loans be notified and start attempting collection again?

Second, in approaching the 1997 loan, would it be wiser to simply pay the requested amount or to attempt to negotiate a balance that I could actually manage to pay in one lump sum? I know that contacting a lawyer to negotiate terms wouldn't be wise. I attempted the consolidation route in 1998 and failed, thus assuring my loans lose their good standing on my credit report. What would be a wise step to take in this situation?

Many thanks in advance for your replies. If I have skipped something obvious in the sticky posts or in another section of the forum, please just point me in the right direction.

Best regards,

Rick

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Call up the DOE and ask to start the Loan Rehabilitation program. You can make very reasonable payments. You will have to make one payment per month for twelve months, never be late and never miss a payment! Then the loan is 'renewed' in a sense. It will be altered on your credit to show current, as if you never defaulted. It does take a year before this happens, but it's so worth it. You'll have a new line of credit that shows current since 1997. If it has passed to many CA's, all of the bad marks fromthis account may not fall off, but I've talked to a few people who did end up having ALL negative marks associated with the loans removed. You can do this with your other loans, too. Imagine having 'never late, current' loans from 1994 and 1995! Then once they're rehab'ed, continue to make your payments on time, of course.

Since these are Federal you can go here to find out who has them now and how much they are. You will probably have to take steps to get yourself a PIN:

http://www.nslds.ed.gov/nslds_SA/

There is always consolidation loans, but those won't get rid of your old bad marks. I don't know how important that is to you, but this is what I did.

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