To clear old student debt from your CAIVRS report, you will first need get out of default and then contact the Education Department to have them remove you from the database.
The first step – getting out of default – can take a couple of days or several months, depending on which option you choose: settlement, consolidation, or loan rehabilitation.
The second step – being removed from CAIVRS – can take up to 10 business days after you get out of default.
Defaulted student loan forgiveness is another option if you’re permanently disabled or your school defrauded you. Read more about borrower defense.
I give step-by-step instructions on all three ways to get out of CAIVRS in my premium guide, Clear CAIVRS Before Closing.
A student loan settlement will get you out of default in about 1-2 weeks. But depending on your student loan balance, a settlement can be expensive, and the full settlement amount will need to be paid in 90 days. Read more about negotiating federal student loan compromises.
Consolidating the defaulted loans into a Direct Consolidation Loan is the most common method that many new home buyers use to return to good standing. You can submit a consolidation application at studentaid.gov. Read more about how to consolidate defaulted student loans.
The process of consolidating and clearing CAIVRS typically takes about 2 to 3 months to complete. But working with a student loan lawyer like me can help cut that time in half. Most of my clients are off of CAIVRS within a month.
3. Loan rehabilitation
Loan rehabilitation won’t help you if your closing date is near. You have to make nine monthly on-time payments to complete the rehabilitation program, return to good standing, and get off of CAIVRS.
You can’t regain eligibility for an FHA mortgage loan until you make your ninth monthly payment. Most borrowers who choose this option do it because they can’t afford a settlement and are barred from consolidating.