| Student Loan Rehabilitation is not a phrase you like to | | | | at least nine monthly payments within twenty days of |
| hear when talking about college loan repayment, | | | | the due date within ten months to the Department of |
| because it suggests that the repayment part hasn't | | | | Education. Once this happens, your loan may be sold |
| been happening and the loans have gone into default. If | | | | back to an eligible lending institution. For Perkins Loans, |
| a student has not made monthly payments, and the | | | | you will need to make twelve on time, monthly |
| loan holder has made a good faith effort to make | | | | payments before the loan is brought out of default. |
| contact and collect on the loan, then after 270 days, | | | | You will continue to make payments to the |
| the loan may be placed into a default status. | | | | Department of Education until the loan is paid off. |
| Once in default, several things may happen. The loan | | | | Avoid default at all costs. If you find yourself unable to |
| may be "accelerated", which means that the entire | | | | make your monthly payments, contact your lender. |
| loan, including principal and interest becomes due in a | | | | They may be able to assist you in finding a way to |
| single payment. Also, you will no longer entitled to any | | | | keep your loans current. If you qualify, forbearance or |
| deferments or forbearance. If you are in default on | | | | deferment may apply to you. These would both allow |
| any Title IV student loan, you will not be eligible for any | | | | you a period of time without making payments. |
| additional Title IV federal student aid until you have | | | | If not qualified for deferment or forbearance, you may |
| made at least six consecutive months of acceptable | | | | still have a couple of alternatives that will keep you |
| payments. | | | | from default. You may be able to choose a plan that |
| Next, the guaranty agency will attempt to get payment | | | | bases payments on a percentage of you total income. |
| in several ways. State and federal income tax refunds | | | | If you've taken a low paying job, this may help you by |
| may be taken as well as a portion (15%) of any Social | | | | lowering your payments to an affordable amount. |
| Security benefits that may be involved. If you are a | | | | Another possibility is a graduated payment plan, which |
| Federal employee, they may garnish 15% of your | | | | allows you to begin with a lower payment which will |
| disposable pay directly. Private employers may also be | | | | rise as time goes on. Since your salary should increase |
| required to deduct this from your paycheck. | | | | over time, this may be another good option. |
| Collection efforts will continue either by assigning your | | | | If you haven't already done so, then consider a student |
| debt to a collection agency, or even taking legal action | | | | loan consolidation. Consolidating can often lower your |
| against you. | | | | payments through a lower interest rate and by |
| Beyond all that, credit agencies will be notified of the | | | | extending payments over a longer period of time. |
| default and your credit rating will suffer. Negative credit | | | | The key to student loan rehabilitation is avoiding it. |
| ratings can stay on your credit report for up to seven | | | | Contact your lender as soon as you realize you are |
| years and will adversely impact your ability to get | | | | going to fall behind. Also, let them know if anything |
| loans or credit. | | | | changes in your life, like your address or school. It is in |
| Loan rehabilitation means bringing your loan out of | | | | their best interests to help you keep up your |
| default and getting back to regular on time payments. | | | | payments, but they can't if you don't keep them |
| For FFEL or Direct Student Loans, this means making | | | | updated. |