Managing Student Loans

Student Loans in Default?

Are you wanting to go back to school, but afraid you can’t? Is one of the reasons because your current student loans are in default? You’re not alone. And all is not lost.

You can be back in school in as little as 6-9 months. Contact your state’s Department of Education. Tell them you would like the status of your defaulted student loans. Ask for information about the Title IV Rehabilitation letter. If your loans have been sent to collections, make sure you get the name and number of the agency that now holds your loans.

Before you call the collection agency, gather up all the following information:

1. Proof of residence
2. Proof of all your bills that you personally pay
3. Proof of employment or non-employment
4. Your previous years taxes

If you are married, your spouse is NOT responsible for your student loans, UNLESS they signed as a co-signer. If they did not sign as a co-signer, then you do not have to include their income information. Therefore, you can have your spouse sign a notarized affidavit stating that they are not legally responsible for the repayment of your student loans, nor, will they be providing their financial information.

Now you are ready to call the collections agency. Answer all their questions truthfully. They will insist upon a down payment, but if you just cannot afford it, they will work with you. Follow each step they provide so you can start the process as soon as possible. Be sure to maintain constant contact. Once you have agreed on a monthly payment that you can afford, you will have accomplished three things:

1. You will be on your way to rehabilitating your loans.
2. You will be fixing your credit that was damaged by the defaulted loans.
3. You will be back in school within 6-9 months.

Make sure you are absolutely committed before applying for the Title IV Rehabilitation letter. If you default during your repayment period, you will not be granted another application.

After 6 months of making your timely payments, call the Department of Education. Ask for a status of your loans and how soon you can receive your Title IV letter. They will contact the collections agency to verify that you have been making your payments as agreed. Then they will mail your Title IV Rehabilitation letter to you. If you receive this letter after 6 months of repayment, but your agreement is 9 months of repayment, you still have to pay until the agreement is fulfilled. Failure to do so will put you in default and you will lose your rehabilitation status.

So now you have your letter, what’s next?

Go to school! Pursue that degree you have always wanted. And while you are enrolled, guess what? The rest of your loans that were in default, can now go back into forbearance. Make sure you call the financial entity that takes over your loans. Provide them with the information of the school you are attending.

Don’t be late for class!