How to Get Student Loans Out of Default Status

If you are looking to get student loans out of default, you can. Having loans in default status will have detrimental effects on your credit score, and possibly lead to the forfeiture of your tax refund and/or garnishment of your wages. Getting student loans out of default status is not very difficult, but it is important you follow the directions accordingly, because not doing so may make the situation worse. This applies to FFELP loans. Loans through private lenders may have different guidelines for removal from default status. If you have private loans, you will have to discuss the status of those loans individually, but as long as you are making some sort of payment, the loans are generally not placed in default. 

How to Get Student Loans Out of Default

People who have loans in default can get them out through student loan rehabilitation programs. To qualify for FFELP or Direct Loan rehabilitation, students must follow the 9 out 10 rule and make nine consecutive payments and make a monthly payment for 9 out of 10 months within 20 days of the due date. Perkins loans require 9 monthly payments to be made consecutively and do not allow for a missed month. Students can only get loans out of default through rehabilitation once. 

If rehabilitation is not an option, students may also turn to student loan debt consolidation to get the loans out of default status. This starts over fresh, with no negative marks on the credit report and allows for deferment. Students can make three consecutive monthly payments or agree to an income based plan which allows them to make their payments affordable based on the income they have. 

Why Get Student Loans Out of Default?

If students don't get student loans out of default, their credit score will suffer, preventing them from being able to get financing they may need to purchase a vehicle or a home. The federal government will be able to take any tax refund the student is due until the loans are either paid off or taken out of default status. The student's paycheck may be garnished for the debt, and the student will not be allowed to enter in the armed forces while their loans are in default. If a student wishes to return to school and requires more loans to do it, he or she will not be eligible for new loans until all current loans are not in default. 

Do not avoid making student loan payments. Talk to the loan servicer and see if there is anything that can be done to prevent the loans from going into default. Look into deferment or forbearance to stop the payments for a brief period of time. Look into income based payment plans, graduated repayment plans, or extended repayment plans to help reduce the total amount of payments due each month. The government is willing to work with borrowers to ensure they can manage their payments.

 

 

 


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