#1 Student Loan Lawyer
Updated on February 4, 2023
Fixing your credit can be daunting. Credit reports have a lot of information and use different codes to tell a story about your financial responsibility. In regularly reviewing your report, you may encounter an entry that says, “collection account student loan permanently assigned to government.”
This status indicates that you’ve defaulted on a federal student loan, and it was paid through insurance and closed. But it doesn’t mean you no longer owe the debt. Here’s what you need to know when your credit report shows “student loan permanently assigned to government.”
What does student loan permanently assigned to the government mean?
A student loan with the status of “government claim/insurance claim” means three things:
You defaulted on a federal student loan owned by a guaranty agency.
The government insured the loan.
The insurance paid off your loan, and it was sent to the government for collection.
Related: Can Students Loans Be Sold to Collections?
Most likely, the loan was placed with the Department of Education’s Default Resolution Group. The DRG may have kept your loan or sent it to one of the private debt collectors the government hires to help borrowers in default.
Is my student loan held by the government?
Most student loans are made under programs administered by the federal government. You can discover if your loan is held by the government by contacting the Federal Student Aid Center at 800-433-3243. If loans on your credit report aren’t with the Department of Education, those debts are private student loans owned by a bank or other lender.
Related: What Are Ed-Owned Student Loans?
What does default on a student loan insured by the US government mean?
The US government insures (guarantees) student loans made by private lenders under the now-terminated Federal Family Education Loan Program. When borrowers default on FFEL Loans, the lender can file an insurance claim with the government to recover the amount due. If that happens, the account will show on your credit report as paid and closed. But the government paid off the loan and not you, which means you still owe the debt. Typically, the Department of Education will add the loan back to your credit report as a new student loan debt.
What does PIF BY CLAIM mean?
PIF BY CLAIM means that your student loan was Paid in Full by an insurance claim filed by the lender or guarantor agency. The PIF notation is used on your student loan account and credit report to indicate that the loan balance was paid via insurance. The new loan holder will contact you to establish new repayment options. If that hasn’t happened, check StudentAid.gov to see which company has your loans.
What is US Dept of ED/GSL/ATL?
U.S. Department of Education (U.S. Dept of Ed), Guaranteed Student Loan Program (GSL), and Atlanta Regional Office (ATL) refers to a division within the U.S. Department of Education responsible for the administration of student loans, including the Guaranteed Student Loan Program (e.g., FFEL Loans). It is in Atlanta. If this mark appears on your credit report, it means you have a federal student loan in default.
Related: What is an FFEL Loan?
Can US Dept of ED/GSL/ATL loans be forgiven?
The defaulted US Dept of ED/GSL/ATL loans qualify for various loan forgiveness and relief programs, such as Public Service Loan Forgiveness (PSLF), income-driven repayment plan forgiveness, the IDR Waiver, and President Biden’s debt cancellation plan. But first, they must be brought out of default.
Enter the Education Department’s Operation Fresh Start student loan program, a lifeline for borrowers struggling with defaulted loans. This program offers a way to bring your account current by enrolling in a payment plan based on your income and family size. No more hassle with nine monthly payments under the loan rehabilitation program or the headache of consolidation.
The Fresh Start initiative not only simplifies the loan repayment process but it also provides a boost to your credit score. Late payments and the default status will be removed from your credit report, freeing you from the burden of these negative marks. And, according to the Education Department, once removed, your federal student loans will no longer appear on your credit report – providing a fresh start for your financial future.
How does default affect me?
Consequences of student loans being assigned to the government include:
tax refund and Social Security Benefit Offset
cannot qualify for an FHA mortgage from the Federal Housing Administration
ineligible for Title IV Financial Aid (new federal student loans, grants, etc.)
loss of professional license (depending on state law)
loss of eligibility for loan forgiveness or repayment options based on income
What to do if your student loans have been assigned to the government
The Department of Education offers borrowers three options to recover from student loan default: repayment, loan rehabilitation, and loan consolidation. The best option for you depends on your priorities.
To get rid of your loans for good: Repayment
Once student loans default, the full amount owed —principal and interest — is immediately due. You have the choice to pay that amount and be done with your debt. You also will have the option to negotiate a student loan settlement for less than you owe, but don’t expect big savings. Federal student loan settlements typically remove the collection fees and save you about 10-15% on the remaining balance.
To fix your credit: Loan Rehabilitation
Student loan rehabilitation is often the best option to fix your credit because it’s the only one that removes the default from your credit report. However, the late payments will remain for seven years.
You can rehabilitate your loans by contacting the collection agency assigned your debt and asking to enter the program. Under the loan rehabilitation program terms, you must make nine monthly loan payments within 10 consecutive months. Your monthly payments will be 15% of your discretionary income. If you can’t afford that amount, you can request something more affordable.
You can only rehabilitate a student loan once. If you choose this option, make sure your contact information is up to date and that you can afford your payments once you complete the process. Ask the new loan servicer about enrolling in an income-driven repayment plan.
To get out of default fast: Consolidation
Borrowers looking to go back to school or clear CAIVRS to get an FHA mortgage need to get out of default quickly. If you can’t afford a settlement, student loan consolidation is the fastest way out of default.
You can do either of the following to get a Direct Consolidation Loan:
Make three full, on-time, consecutive monthly payments on the defaulted loan.
Agree to repay your new loan under an income-driven repayment plan.
You can start the consolidation process by contacting the collection agency that has your loans or visiting StudentAid.gov.
Consolidation does not remove the default line from your credit report.
Note: If you previously consolidated, you may be able to do so again. Borrowers with FFEL Consolidation Loans may consolidate a second time. The new loan will be made under the Direct Loan Program.
Need help with your loans? Let’s talk.
If this sounds overwhelming, I’m here to help. For years, I’ve worked with people like you to get their federal student loans out of default.
Book a call with me today. We’ll work together to develop a plan that fits your current financial situation and sets you up to meet your future goals.