If you default on any debt, you will receive negative notations on your credit file. Paying the debt afterward does not undo the damage to your credit report. In the case of some defaulted student loans, however, it is possible to repair your credit history by bringing the loan current.
Types
Student loans can be categorized as either federal or private. Federal loans are distributed by the U.S. government and private loans are distributed by private institutions such as banks.
Loan Rehabilitation
If you want to bring your defaulted federal student loan current, you must undergo loan rehabilitation. This requires you to make at least nine payments on time to bring your loan out of default. If your student loan is private, you may need to do no more than catch up on your payments.
Credit History
Once you successfully complete loan rehabilitation for your federal student loan, all evidence of your previous late payments will be removed from your credit history. Each payment notation on your federal student loan will update to "paid as agreed."
Considerations
You may be able to negotiate with your private lender to remove some or all of your late payment notations once your student loan is no longer in default. A private lender, however, is under no obligation to alter your credit report.
Warning
A defaulted federal student loan will prevent you from being eligible to receive government-backed mortgage financing such as Federal Housing Administration and Department of Veterans Affairs loans.
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