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Options Regarding Defaulted Student Loans - The Bills.com Blog
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Options Regarding Defaulted Student Loans
Tuesday, Jul 21, 2009
Question: Who do you go to to start the rehabilitation process of defaulted student loans? The collection agency itself?
Answer: First find out who currently is holding your loans and whether the loans are federal or private student loans . The rules governing federal loans (whether through a bank/private lender or the Department of Education) are tightly regulated by the federal government and will have different repayment options than private loans (which are not subsidized by the government, and therefore are not regulated as closely).Since most federal student loans can not be discharged though bankruptcy and have no statute of limitation regarding their collection, it is wise to get them out of default and on the path to being paid off as soon as you can. And while collections on some private student loans may be limited by a statute of limitations (laws vary by state, so consult with an attorney in your state to find out more about these limits), defaulting on them can also be vary damaging to your long term financial health, and as such, should also be taken care of as soon as you can.
The government has information on several repayment options for those who have defaulted on federal student loans at ed.gov/repaying and ed.gov/rehabilitation .
Additionally, several federal and state agencies offer programs to help you cancel or reduce all or a portion of your student loan debt without filing for bankruptcy. Most programs involve teaching, nursing, or military service. To learn more about available programs and how you can apply, visit the Federal Student Aid website .
To apply for loan rehabilitation, you will need to request rehabilitation from your loan holder. You may be dealing with a collection agency. Regardless of who you are dealing with, you should insist on getting the agreement in writing and be sure to carefully read everything before signing.
The
main item you will negotiate in the rehabilitation will be your monthly payment. Your loan holder may tell you that you have to pay an amount beyond what you can afford. This is wrong. The law says that you only have to pay what is reasonable and affordable for you. There is no minimum amount that the loan holder must charge.
You can also look into consolidating your student loans into a single loan. There are, however, a few restrictions on consolidating a consolidation loan. The US Department of Education has a Borrow Services website specifically for federal loan consolidating and other repayment options.
You can consolidate using a federal program or through a private lender. Keep in mind that if you consolidate federal loans into a private consolidation loan with a private lender, you will lose your rights under the federal loan programs. These include deferment, forbearance, cancellation, and affordable repayment rights. Also, federal consolidation loans generally have lower interest rates. You can check out studentloanborrowerassistance.org for more information.
Also, private student loans cannot, in general, be consolidated with federal student loans. The low interest rates on federal consolidation loans are not available to private education loans. Nevertheless, there are several options for refinancing private education loans.
Since most private education loans do
You can also look into consolidating your student loans into a single loan. There are, however, a few restrictions on consolidating a consolidation loan. The US Department of Education has a Borrow Services website specifically for federal loan consolidating and other repayment options.
You can consolidate using a federal program or through a private lender. Keep in mind that if you consolidate federal loans into a private consolidation loan with a private lender, you will lose your rights under the federal loan programs. These include deferment, forbearance, cancellation, and affordable repayment rights. Also, federal consolidation loans generally have lower interest rates. You can check out studentloanborrowerassistance.org for more information.
Also, private student loans cannot, in general, be consolidated with federal student loans. The low interest rates on federal consolidation loans are not available to private education loans. Nevertheless, there are several options for refinancing private education loans.
Since most private education loans do
not compete on price, a private consolidation loans is merely replacing one or more private education loans with another. So the main benefit of such a consolidation is obtaining a single monthly payment. Also, since the consolidation resets the term of the loan, this may reduce the monthly payment (at a cost, of course, of increasing the total interest paid over the lifetime of the loan).
However, since the interest rates on private student loans are based on your credit score, you may be able to get a lower interest rate through a private consolidation loan if your credit score has improved significantly since you first obtained the loan. For example, if you've graduated and now have a good job and have been building a good credit history, your credit score may have improved. If your credit score has increased by 50-100 points or more, you may be able to get a lower interest rate by consolidating your debt with another lender. You can also try talking to the current holder of your loans, to see if they'll reduce the interest rate on your loans rather than lose your loans to another lender.
You can find a wealth of useful information regarding student loans on our website.
I wish you the best of luck as you look to bring your loans out of default, and I hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
However, since the interest rates on private student loans are based on your credit score, you may be able to get a lower interest rate through a private consolidation loan if your credit score has improved significantly since you first obtained the loan. For example, if you've graduated and now have a good job and have been building a good credit history, your credit score may have improved. If your credit score has increased by 50-100 points or more, you may be able to get a lower interest rate by consolidating your debt with another lender. You can also try talking to the current holder of your loans, to see if they'll reduce the interest rate on your loans rather than lose your loans to another lender.
You can find a wealth of useful information regarding student loans on our website.
I wish you the best of luck as you look to bring your loans out of default, and I hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
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