![]() If you have a loan in default, you can only use loan consolidation under two conditions. Your federal Direct Consolidation Loan will have an interest rate that’s an average of your former loans. This loan pays off and replaces your current education debt, combining your accounts into a single, new loan. If you have private loans in default, be sure to check with your lender to see what assistance might be available to you.Ĭheck Out: Defaulted Student Loans: Can You Refinance?Īnother way to fix your default status is to consolidate your loans into a federal Direct Consolidation Loan. Keep in mind: Unfortunately, most private student loan lenders don’t offer rehabilitation as an option for defaulted loans. If you default on your loans again, you will no longer be able to choose loan rehabilitation as an option. You’ll also once again be eligible for federal student aid, making it easier to afford to go back to school. Once you’ve made your nine payments successfully, your loans will no longer be in default and any wage garnishment or other collection procedures will end. When you sign and return this agreement, you can formally enroll in loan rehabilitation. Your “reasonable monthly payment” is generally determined by calculating 15% of your annual discretionary income, divided by 12. With this information, your loan servicer will determine a monthly payment you can reasonably afford, and send you a loan rehabilitation agreement within 15 days. If you’re eligible for loan rehabilitation, your servicer will ask you to provide your latest tax return. To rehabilitate your defaulted student loans, contact your loan servicer first. So, if your wages are currently being garnished, loan rehabilitation may not be a good option for you. Wage garnishment is when a portion of your paycheck is sent directly to your creditor, and this won’t count toward your nine voluntary loan payments. ![]() These payments are usually for 10 consecutive months for Direct Loans and FFEL Federal Family Education Loans (FFEL) and nine months for Perkins loans.īut any involuntary payments you’re making while in default - like wage garnishment - are likely to continue in addition to your loan rehabilitation. You agree to make nine consecutive voluntary payments, at an amount set by your loan servicer, within 20 days of their due date. Student loan rehabilitation is a formal agreement between you and your loan servicer that will get your loans out of default - if you complete it successfully. Rehabilitate your defaulted student loans Learn More: What Happens When You Default on a Student Loanġ. However, there are a few strategies you can use to put yourself in a position to return to school with defaulted student loans. Once you’re in default, you lose eligibility for future student aid. When this happens, your entire loan comes due immediately, including interest and fees. The timeline for this can vary based on the type of federal student loan you have.īut in most cases, your loan goes into default after 270 days of delinquency. ![]() If you are unable to get caught up on your loan payments, your delinquent loan may go into default. This can include changing your repayment plan or using deferment or forbearance options to give you the time you need to get your finances back in order. On the day after you miss your first payment, you become delinquent on your loans.Īt this point, you can work with your loan servicer to come up with a plan to get your account current. What are my options if I want to go back to school with defaulted student loans?ĭefault comes at the end of a lengthy process when you are unable to make your required monthly payments.
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