Grad PLUS loan eligibility-- What to do about small collection amount on credit report

[Lauren Victoria]

I just got accepted to graduate school, and am in the process of figuring out financial aid. I submitted my FAFSA and am waiting for my school to tell me how much I will get. I believe I will probably want to apply for a Grad PLUS loan. My question is about eligibility. I know they don't actually look at your credit score, but they look at things like bankruptcies, liens, delinquencies, accounts in collection, etc. I have a good credit history, except for one small medical bill ($133) that went into collections years ago, and that I didn't even know about until I checked my credit report. It's set to fall off my credit report in May 2013, but I'm worried it will make me ineligible to get a Grad PLUS loan and I start school at the end of January. I have no issue paying the amount if that means it won't be held against me when I apply for the PLUS loan. Has anyone had any experience with this? If I pay it, I'm going to try to get it deleted from my credit profile through the collection agency. But if they refuse to do this, should I pay it anyway as long as "paid in full" appears on my credit report? If it's paid in full but not deleted completely from my report, will I still be able to get the loan?

[KindaHardWorker]

I would do a cost/benefit analysis here: what is $133 in the grand scheme of things? If you are starving or have a family to provide for, that's one thing. But if you have money that is rightfully owed, you need to pay it. Trust me, as someone who has wished for collections to go away, they don't. Start a Kickstarter if you have to, just get it paid.

[queenleblanc]

If you want the collections agency to delete it from your credit report ... you may want to actually find legal representation to ensure that it actually happens.  Usually whoever you owe for that bill is the only agency that can REMOVE the collections item from your credit report, not the actual collections agency.  Pay the bill for sure, ASAP, but before you pay it ... make sure that you cover your bases and follow-through by demanding a follow-up credit report that shows the debt is cleared once you pay it. 

[AboveTheRim]

If it's set to fall in May 2013, and you don't start school until January, I wouldn't worry about it. I've had to deal with this more times than I'd like to admit, so let me tell you why I say this:

 

Your eligibility for the GradPLUS loan is only good for a few months (90 days I think), so you won't want to apply for the loan too early or you'll just have to re-apply for when you actually need it. Since you're not going to school until January, you won't want to apply until around October. By then, it will be off your records and will not affect anything.