A defaulted student loans can lead to unfavorable consequences to borrowers. Once your loan enters the default status, the maturity date of each promissory note is accelerated, making the overall payment in full due right away. You will not be able to postpone repayment through a deferment or forbearance.
What’s more, your wages can be garnished and your federal income tax refunds can be withheld. With damaged credit you are also not eligible for other types of federal loans like VHA or VA.
In case your loan already entered the default status, don’t worry. You still have hopes if you try to pay even just a little consideration on your debts. Here are some steps that you can take to get out of student loan default.
Repaying your Defaulted Student Loans
First, make arrangements with your lender to repay the loan. Once you have made six regular payments, chances are you are eligible for an extra Title IV aid.
After you have completed twelve regular payments and applied for and received “rehabilitation”, you will no longer be considered in default. As your credit activities are reported to credit reporting agencies, the bureaus will remove the default status from your credit report.
Just contact your lender for further information about the available repayment options that are affordable for you. The financial aid office at your school should also be able to tell you the name, address as well as the contact number of your lender. They can also give you advice about your repayment problems.
Student Loan Rehabilitation
This program designed to rehabilitate the defaulted student loans and return such loans to a favorable status. It requires 12 consecutive monthly payments of a predetermined amount, agreed by both parties.
If you default on your student loans consider contacting your servicing agency to decide the loan rehabilitation program that can satisfy both parties. If you cannot reach an agreement with your lender about a reasonable rehabilitation program, contact the office of the Federal Student Aid Ombudsman to resolve the disputes.
In short, student loan default can have negative consequences to your financial life. So, just enroll in a student loan rehabilitation program to repay the loans because if you don’t, your credit rating will suffer and you cannot get any types of loans in the future.