Back Into Repayment After Student Loan Default

Q: If I have defaulted on my student loans, how do I get back into repaying my student loan after the default?

A: Most individuals will go the route of rehabilitation to get out of default, or loan consolidation to get out of default. If you are able to get out of default through rehabilitating or consolidating your federal student loans, you will again be eligible for the federal loan repayment options and deferments that you were eligible for before you defaulted. As of August 2008, you are only able to get out of default through rehabilitation ONCE per loan, and their are restrictions on how many times you can consolidate.

1. Consolidation to Get Out of Loan Default
Consolidation works like this for defaulted borrowers: after you obtain a federal consolidation loan, you essentially get a new start with that loan. Your credit records will no longer have “currently in default” listed on them, and collection efforts / garnishments will stop. With federal loan consolidation programs you may also qualify for one of the income-based repayment plans.

2. Rehabilitation to Get Out of Loan Default
a.) For this option you will need to request rehabilitation from your loan holder or collection agency.

b.) You will need to negotiate your monthly payment. A few things to note: Know that there is NO minimum amount that the loan holder must charge, and (by law) you only have to pay a fair amount which you can afford. If you are being told something different you may need to seek additional help.

c.) Request that you receive the rehabilitation agreement in writing, and like anything read carefully before signing.

Defaulting on private student loans is a bit different. You can only rehabilitate a private student loan if your lender offers a rehabilitation program (and you qualify), but be forewarned that most private lenders do not offer rehabilitation. If you have defaulted on your private student loans, it is best to start by contacting your lender to see what options you have available with your specific private student loan. This is a basic overview of repayment after student loan default, as always, you should check with your lender for your specific circumstances.

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