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Options and Advice from Bills.com if Delinquent on Student Loans
Tuesday, May 27, 2008
Question: I already have a Sallie Mae loan. Went to school but could not make it in the field i went to school for. Now I have a job but it doesn't pay very much. I have been delinquent in my payment and am struggling to keep my head above water. I cannot make such large payments. IS THERE ANYTHING I CAN DO? PLEASE HELP ME.
Answer: A student loan is in default if the student has not made payments for 270 days. One primary consequence of a defaulted student loan is loss of eligibility for future student loans or any type of state or federal student aid. The default is reported to all national credit bureaus which generally eliminates the option of credit-based alternative loans. Another possible consequence of a default would be wage garnishment.Contact your loan servicer, you may qualify for a deferment, forbearance, or repayment alternative that is more affordable. Consolidation can help by extending your loan's repayment term beyond the standard ten years. While this will increase the total interest charges, the monthly payments will become more manageable. Bills.com is partners with Freedom Student Loans. If you would like a free consultation, please visit www.freedomstudentloans.com.
While
your federally insured student loans are in default, the U.S. Department of Education (DOE) will not allow you to obtain any more government backed loans. Luckily, the same regulations also state that you do not have pay off the entire balance of your defaulted loans to become eligible to borrow again. The DOE requires that student loan servicers, the companies that lend money and/or manage students loans under an agreement with the DOE, provide borrowers a way to bring defaulted loan current, a process called “rehabilitation.” Rehabilitating your defaulted loans will not only make you eligible for new student loans, it will also clear the delinquencies these accounts are showing on your credit reports, meaning that the accounts should appear as if you never defaulted on the loans.
Rehabilitating your student loans is a relatively easy and straightforward process. First,
Rehabilitating your student loans is a relatively easy and straightforward process. First,
you need to contact your lender or servicer to express your desire to repay and rehabilitate your defaulted loan. Once you and your lender have agreed on a repayment plan, you need to make sure that you make all of your payments on time; late or missed payments will jeopardize your rehabilitation plan. After you have made six timely payments on the plan, you will again be eligible to obtain federally backed student loans. After you have made twelve payments on time, the lender will finalize the loan rehabilitation by reporting the account as current to the credit bureaus and removing the past delinquencies from your credit reports.
I encourage you to explore www.finaid.org a wonderful online resource for student loan questions. Bills.com also offers a wealth of information about student loans .
I hope my advice helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
I encourage you to explore www.finaid.org a wonderful online resource for student loan questions. Bills.com also offers a wealth of information about student loans .
I hope my advice helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Juan on Wednesday 18th February 2009 11:06
I would like to start paying my student loans but my payment is too high and it's already in collections. I have not paid it with in two years. My payment is 465/m and i can't afford it. I would like to start making payment but half of that amount. Can this be possible.
2. Posted by Brent on Wednesday 18th February 2009 19:01
Once a student loan goes into "default" status the full balance of the loan becomes due immediately. It also means that other options for delaying payment, including student loan deferment and forebearance, can no longer be used. Given the size of most student loans, it's usually impossible to repay a defaulted student loan in the single payment that loan collectors may request. There are mechanisms for repaying defaulted loans and for both regaining your eligibility for more student loans and improving your credit score. FSA outlines the general approach to recovering from a defaulted loan (see repayment options), but these suggestions are very general and hard to apply in practice. Recommend working with a company that specializes defaulted student loans. Several such companies exist, and can be found online. In general their services are free - eventually they plan to take you from a defaulted loan to a "current loan" status and consolidate your other loans. The long-term benefit is reducing yout interest rate, monthly payments and student loan debt. The short term benefit is that they will guide you through the processes of "fixing" your defaulted loan.
3. Posted by susie smith on Sunday 19th July 2009 15:25
my daughter is seriously default on her student loans. She is not doing very well finacially and cannot afford to pay. what can happen to her? she does not own anything like savings or real estate. and she is not married.
4. Posted by Bill on Monday 20th July 2009 09:08
See my answer to another reader regarding Advice About Student Loan in Default. The details surrounding that question may not match your daughter's precise circumstances, but the basic concepts surrounding student loans in default are universal. You can also learn more at the US Department of Education's Collections Guide to Defaulted Student Loans page. One last thought: Look at the Income-Based Repayment (IBR) to see if your daughter qualifies.
5. Posted by nancy kern on Wednesday 16th September 2009 13:47
son defaulted on loan and I co signed I lost my jop have nothing how can I pay this back, what can they do to me.
6. Posted by Bill on Wednesday 16th September 2009 14:59
Based on the context of your question, I will assume you are asking about a federally backed student loan. The U.S. Department of Education has a clear Web page Facing Loan Default, which details the steps it may take to recover an outstanding balance on a federal student loan. The Student Loan Borrower Assistance Project offers a Web page outlining the steps in private student loan collection.