Editors Note: This week’s mailbag question comes from “Fred” who wants to address his private loan problems and wants to know if consolidation is the answer.
Student Loan Sherpa,
I could use your advice on how to deal with private student loans that have been in collections for years. The loans originated in about 2000 for a masters degree through Citibank and have been resold several times. I have been paying on time for years but the current loan owner, ConServe, refuses to update my credit report to show I’m paying. My balance is about $15,000. This is killing my credit.
The second issue is that I know have a huge student loan through Sallie Mae due from my recent MBA that tops out at over $100,000. Luckily those are federal loans but obviously I real problem. I have already gone through forbearance and put my loans on an income-based plan. Granted, I do make good money but it is equal to my total loan debt.
So here is the big question…anyway to consolidate all this into one loan that will bring the old student loans with Conserve current and make my total payment affordable? I am now delinquent 2 months with Conserve as I’m trying to stay current with Sallie Mae.
Thanks for your advice.
Consolidation Into One Affordable Payment
I really like your thinking behind this idea. Unfortunately, it would be really bad news for these loans and your finances. In fact, I call it the golden rule of student loan consolidation. When you combine a private loan with a federal loan, the new consolidated loan becomes a massive private loan… and a massive headache. It would be great if we could take our pesky private loans and get the perks, such as income based repayment, of the federal loans. However, with the way the law is currently written, this is impossible.
Dealing with the private loan, ConServe, and negative credit reporting
I’m not terribly familiar with ConServe, but it looks like they are a company that specializes in student loan debt collection. The fact that you have worked with them and started making your payments is great.
As things stand right now the negative items on your credit report will disappear within 7 years, provided you continue to make monthly payments. However, 7 years is a long time to wait, and I’m sure you would like to improve it ASAP.
I’ve done a little preliminary research on this particular issue, and at least one source has a couple suggestions for getting it removed. According to the article, negative items on your credit report can be removed by the company that left them. Finding a way to get ConServe to remove these items falls on your shoulders. Be polite but push the issue. If you can find some leverage with them, you could find your key to a positive result.
Lowering your monthly payments with Consolidation
Even though your private loans can’t be combined with the federal loans, it doesn’t mean that consolidation can’t help you. Consolidating your private loans can result in a lower interest rate or a longer period of time to repay the loans. Doing one or both of these will lower your monthly expenses (but be warned, if you extend the life of the loan without getting a lower interest rate, much more of your monthly payment will be going towards interest).
Because you have the negative items on your credit report, you will probably need a co-signer to get a loan (and you will definitely need one to get the best rates). If you have someone who can co-sign for you, I’d recommend checking out our Private Loan Consolidation Reviews as well as doing all the research you can. Having your business background should be a huge asset here.
One other thought
You sound like someone who would benefit greatly from H.R. 1330. This is proposed legislation that among other things would allow students to combine their private loans with federal loans and get favorable repayment terms. It might be worth your time to reach out to your elected representative and share your story. The more stories that get told, the more likely they will be to act.
Readers: Have you been in Fred’s position? Do you have any advice?