Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

Question

Posted in Student Loans
Profile Image

Question By
kyrie103

0 Contributions
0 People Helped
Should loans in collections be paid first or loans in forbearance?
I have 2 types of student loans: federal and private loans and 3 private loans are in collections. Which should I begin to pay on, the federal although I have arranged for a pay as you earn arrangement or those in collections, because I have read that its better to wait 7 years without paying, rather than paying them since it made other people's credit worse?

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW
All Responses

Results 1-4 of 4Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
Top Contributor
65 Contributions
153 People Helped
Most Helpful Response

Helpful to 3 out of 3 people

Oh, to add.... yes, if you pay off a loan after 6 years, your credit rating will be much, much lower for year 2, 3, 4, 5, 6, 7.  

It may be slightly higher (or it could just be the same) for the first year, before it was due to fall off.

*Any* payment you make to a collection agency extends the date on that debt.

Top Contributor
65 Contributions
153 People Helped

state of limitations

Helpful to 2 out of 2 people

Found a good website that has those listed by state:

http://www.bills.com/statute-of-limitations-on-debt/

So they wouldn't even be able to sue me for those debts I have now.  I'd be braindead to pay a collection company anything at all.

Top Contributor
65 Contributions
153 People Helped

Helpful to 2 out of 2 people

You want to pay off the federal loans first.

Depending on what state you live in and your financial condition and how long it has been in collections, you may not want to pay off the private ones at all.  e.g. Texas -- where they can't garnish your wages, take your home, etc.  

Right now, I have about 80k unsecured debt from credit cards.  My last payment on all of them was about 4 1/2 years ago. Essentially the only recourse for these collectors would be to sue me, but since I'm on SSD, that's never going to happen.  Paying those debts would be foolish -- it's far better just to let them fall off.

Federal loans won't fall off... which is why they should always be paid first.

Top Contributor
7370 Contributions
3810 People Helped

Helpful to 3 out of 4 people

Your private loans are still collectable until paid in full so your best choice would to be paying these off as fast as possible to get rid of the huge interest and late fees that are piling up.  If you can't pay them right now, research all possible alternate repayment arrangements so you can get them paid.  Forebearance just allows the federal loans to go unpaid for a specified period of time, but they, too, will eventually have to be repaid.

Student loans will not drop off your credit report until after they are paid in full and they cannot be discharged in bankruptcy except in conditions of extreme hardship.  Those were the "perks" the student loan industry (and it is an industry) got when bankruptcy laws were changed in the 1990s.

Results 1-4 of 4Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.