Student Loan Defaults

If you have defaulted on your student loan you are in a difficult position. Not only are you likely to have to repay this debt your credit will be ruined.

When your student loan goes into default, your account is turned over to collection agencies and various collection procedures begin. In addition, the government can garnish your social security benefits, your wages, and more.

Even though Congress created a law called the Fair Credit Reporting Act where you only have a negative mark on your credit report for a maximum of seven years, these debts can be collected upon for life!

If you have a defaulted student loan on your report you are likely to have to pay interest rates of roughly 25% and place large down payments, just to be approved. More often than not you will be turned away for a new line of credit.

There is a possibility that this mark can be removed from your report and a chance that you may be able to remove the debt entirely. To do this, you should dispute the collection marks on your report.

You should send a dispute letter to each bureau; in your letter provide an explanation as to why the mark is not accurate. For example; it has been reported for seven years already, not my account, account is paid in full and so on.

This is the most difficult item on a credit report to negotiate. As a benefit to you, we suggest that you hire a credit repair service to dispute it on your behalf. This will give you a licensed attorney fighting for you which will be knowledgeable of the new laws constantly passed by congress to help protect consumers.

Hiring an expert can be done at very reasonable rates and, compared to the high cost of a low credit score, is a good idea. We feel it is worth the money since your credit score impacts every aspect of your life.

Please be aware that a private loan, such as one with Sallie Mae, will be difficult to remove but easier than a federal loan. A loan from the government, such as a Stafford loan or the Perkins loan, will be much harder to remove from your report.

When the bureaus receive your sample dispute letter they will contact the creator of the negative mark and ask them to verify the debt. They will verify that the account is yours, the dates are correct, and the balance of the account.

If the account can not be verified then the negative mark must be removed from your credit report. This is due to the Fair Credit Reporting Act saying that any unverifiable mark on your credit report must be removed.

Errors are made all the time by the bureaus and lenders, but it is your credit that will suffer. Estimates show that 1 in every 4 people have an error on their report that is costing them money in higher interest rates. Therefore, if this mark is in error, it is very important to include all documentation that you have with your dispute letter to verify it is in error.

In sum we suggest you dispute this mark with the credit bureaus. Defaulted student loans are removed every day from credit reports and if you have it, it does not mean you will have a low credit score for the rest of your life.