Shoptalk 542, March 2, 2010

Policy Resources

Focusing on prior-holder consumer credit reporting after FFELP loan rehabilitation

The Higher Education Opportunity Act (HEOA) stipulates reporting requirements for defaulted FFELP loans that have been rehabilitated. Specifically, the guarantor or any other holder that reported a defaulted FFELP loan to a consumer reporting agency must request that the agency to which the default was reported remove the default status from the borrower's credit history. This requirement applies to loans included in rehabilitation sales that take place on or after August 14, 2008.

Final regulations effective July 1, 2010, provide a timeframe and clarification for the consumer credit reporting requirement. The prior holder of a defaulted FFELP loan must, within 30 days of receiving a rehabilitation notice from a guarantor, request that the consumer reporting agency to which the default claim payment or other equivalent record was reported, remove such information. TG will soon provide information on the process it will use to notify prior holders about loan rehabilitations.

To learn more
For more information on loan rehabilitation, see 34 CFR 682.405(b)(3) in the integrated regulations on TG Online.