Managing Student Loans

If you have allowed your student loans to go into default then you already know that you have made a costly mistake which could have been avoided. Perhaps the court judgment is already in place or the IRS has seized your tax refunds to apply to your debt. Maybe you’ve had to deal with the embarrassment of your payroll department sending your garnished wages directly to your lender. No doubt you’ve seen the size of your debt increase due to the collections activity and court costs.  

Meanwhile your credit rating has plunged to the depths and you’ve found your application for future federal education loans denied. Possibly you are about to lose your job as your professional licence is due to be revoked due to default on student loans.

However it is not too late to deal with federal student loans which are in default and take charge once again of your loan repayments. If you are serious about repairing the damage then the Department of Education is willing to work with you, through their rehabilitation program, to bring your loan out of default status. This will enable you to resume your loan repayments with the rights to forbearance and deferment reintroduced.

If you are in default with your student loans then this status can be removed from your credit file if you contact the education department and apply to the loan default rehabilitation program. A payment will be worked out which you are obliged to meet on time for nine consecutive months.

If you comply with the terms outlined in the program then at the end of nine months the loan will no longer be in default and you can resume normal payments to the lender. Any arrangements for collecting your overdue debt via IRS holding of taxes or through garnishee orders will cease.

The removal of the status of default will not remove the fact that your payments were recorded as late but this has less long term damage than that of a default status. It is possible to work to repair your credit rating by meeting all future credit obligations on time.

Far too many graduates are allowing their student loans to fall into default status rather than addressing the problem. It takes 270 days for a federal student loan to be recorded as in default so there is a large window of opportunity there for preventative action to be taken. If you are facing a possible default situation then take action to circumvent it by contacting your lender and discussing the various options open to you. Whatever you do don’t allow your loans to reach the default stage in the first place.