Today I’ll be sitting down with James Lee from The Phenix Group and we will be discussing how defaulting on your student loans can affect your credit score and what you can do about it. Now. Hey y’all. Abby Husbands here, I’m a realtor in Austin, Texas, and if this is your first time stopping by my channel, you might want to consider subscribing. Today I’ll be sitting down with James Lee from The Phenix Group. He is an amazing credit repair specialist and we will be discussing student loans and how student loans and defaulting on your student loans can affect your credit score and what you can do about it.
Hey y’all, so this is James Lee with The Phenix Group. Hello James.
And today we’re going to be discussing student loans because what I’ve noticed in like the past couple of years I’ve had clients that have come to me that have wanted to purchase a home, but for some reason they’ve defaulted on their student loans because they stopped paying on them. I typically don’t get into people’s finances. So tell us what happens when people decide to stop paying on them. Why they stop paying on them and why it’s horrible to not pay your student loans.
Yeah, we’ll show the two main reasons that I find when I first start talking with a client, as far as why, what got them into the student loans in the negative position that the rain is a, either a deferred the payments after they got out of, out of college and then those students or be a, they put them in forbearance after a difficult financial situation. And so usually for student loans are defaulted or on forbearance for a good six months and then when it’s time to make that first payment, they either forget about it or they just kinda like put it on the back burner out of mind, out of sight type thing. And so when that happens, you know you’re going to, you’re going to get late pay after late payoff and 35 percent of our five goes score is payment history. So that in itself is going to drop the, you know. And go ahead. Well, I was just gonna say because I did have one client who stopped his student loans and then he just thought that they were going to be forgiven and he said he actually forgot that he had student loans.
Yeah, yeah. Yeah. And so if after student loans are delinquent for a period of time, the next steps are either they get moved to collections and if student loans, gifts collections, you were guaranteed anywhere between two to three times the remaining principal, the payback. So that’s the first thing. And then the second thing is if they’re in collections for a certain period of time, the next step wage garnished.
So what we’d like to do with our clients is we like to help them either prevent the collection status or prevent the wage garnishment by consolidating the student loans, getting them into one fresh new loans so that they can begin making payment history on that fresh new loan. And then we’ll we can do on our end is we can turn around and we can engage all the individuals student loans that have been reflecting those days and we have success with removing those accounts. As those accounts come off the credit report, late pays come off with it and that’s going to help their scores pretty substantial.
Okay. You were talking the other day to where you were saying like say someone decides to file for bankruptcy. Is that right that you cannot touch student loans? Like you will always have to be responsible for paying those back?
Yeah, there is absolutely no way out of student loan. No. Somebody compile a bankruptcy and they can put in all these different accounts within the bankruptcy, medical utility, whatever they have. You can put those into the bankruptcy other than student loans. So yeah, student loans is never something that you can just like trying to get rid of unless you get that forgiveness, which is few and far between.
Well, because then I also had another client who said that she went to work for the state of Texas and there was some sort of a program that if she worked for them long enough that it would, they would forgive her student loans or have you heard of that?
No, I’ve never heard of that. And you know, what the forgiveness part, it would be phenomenal, right? You don’t have to pay all the, all the balance, but I don’t, I think that those student loans that are reflecting the light pays, uh, before that happens, come off the report even in the forgiveness. And so they might have all these individual student loans reflecting on their credit report with a $0 balance, but there’s, their scores are still negatively getting impacted from reporting on it.
Oh, okay. So what you guys do is you remove them, but the late pays go with them?
Yeah. So we removed the entire account itself once, once, usually people will have, before they consolidate the student loans, I, they’ll have four, five, six, seven individual student loan accounts reflecting on the credit report. It’ll say something like us department of Ed or something like that and then, you know, once you consolidate those, all those four, five, six, seven individual student loans are going to close because now you know, now they’re in just one loan and then that’s when we can turn around and we can have success with removing those individual accounts.
Okay. And about. I know it’s going to vary from client to client, but is there like an average time to pay it off and to clean up their credit that you’re seeing?
Everything is different, but we can we get it done within the time of six months or less know. Usually with student loans it, it takes about a month and a half or so to actually get them fully consolidated. So you kind of have that waiting game and then after they fully get consolidated that’s when we can turn around and engage. But yeah, within the time length of the program, which again is six months and then as far as uh, the repayments go, they have income based repayment plans. So that helps with the consolidation as well. Perfect. Yeah. Perfect. Sorry, I didn’t mean to interrupt you. We guide them through that entire process. Um, I have an email that I can send him. It gives step by step instructions on how we consolidate. If they have any questions, you know, I’m right here.
Okay. So is that something that you’re seeing because it does come up quite often, is that people just stop paying their student loans? Is there like some myth out there that people are saying that if you don’t pay their student loans something good happens because it,
I hope, I hope no one’s getting bad advice. I mean for me the majority of what I see is again, just bim, either putting those student loans into forbearance or student loans and then just never picking up on the payments once it’s time to start making the payments.
Okay. And why would they do that? Like why would they differ them for example?
So what usually happens whenever they get out of college and during that transition of getting a job or getting settled in their job, um, the government will give people, you know, x amount of time from graduating to them being hang on the loans. Perfect. Uh, the forbearance is if somebody comes into a financial situation, um, to where I can’t really make payments on the student loans at the time. And so the government will be able put them on forbearance usually about six months or so. Um, and then, yeah, so that’s the reason for the.
So essentially keep paying your student loans.
Yeah, don’t. The worst thing you can do is get the late payments on the credit report because again, you know, our scores broken into five categories. The number one category that impacts this is payment history, 35 percent of our fico score. So it’s better to just be proactive with it and go and put them in forbearance if you need to. But, but really try and avoid those late pays.
So it was a late pay after 30 days. That’s the first late pay.
Well, I mean really it’s one day after that due date, right now you can call in and maybe sing, say a story, you know, see if they’ll help you out with that. But yeah, typically your one day pass through, that’s going to be considered a 30 day late.
Pay Them on time.
Something else with your program, which we all love at JP and Associates, we all love The Phenix Group because you guys get it done effectively and aggressively, and you do it for a fee. So just run that through real quick for people that are just now joining us for the first time that haven’t watched our previous videos, how your process works.
Everything is completely free up until we actually get to work for the client, you know. So, um, there’s several conversations that happened before client enrolls into the program. Those conversations are free. Um, there’s a whole credit report analysis on, uh, the client’s credit report. Did you even determine if they’re going to be a good candidate for the program? That credit report analysis is free. So. So yeah, up until we actually go to work, call us. It’s free. Um, as far as the cost of service goes, it is just entirely based off of the work that has to be done.
So it’s based off of how many accounts are we going after? How many collection accounts are we going after charge off? How much negative debt? When I say negative debt, I’m not talking about like credit card balances are car notes or anything like that. Negative debt being just accounts that are in collection status.
Okay. And you guys work with an attorney?
That’s it. That’s it. And that’s what allows us to get those aggressive results in a quick timeframe. You know, with a simple dispute process, you’re only engaging at that bureau level. And with our attorneys we can leverage a whole bunch of different federal and state consumer laws at the collection agency level and the defaulted creditor level, that’s where you really see those aggressive results.
Awesome. We’re going to leave James’s information in the comments section below. So if you have any questions, just reach out to James directly or to myself, and I will hook you up with James. So thanks again, James, and I will see you next month.
*This interview was transcribed using Temi.