All About Student Loans Part II: What can be done about defaulted loans?

What can be done about defaulted loans?

Lets recap, in part 1 we established the fact that student loans are federal loans and they mean business. Its not wise to go delinquent on these as the repercussions are quite serious. Not only do they destroy your credit there are a lot of other…you know what, without going into it again (you can just read about it below) I wanted to go over what options you have available to you if you ever get that call for an overdue student loan. Good? Great!

If you can’t pay your debt in full or pay a settlement out over a three month max term, you can enroll into another monthly payment plan. This is called the loan rehabilitation program. What this is is a 10-13 month repayment plan you make with the agency contacting you, you can either mail the payment or do it electronically for no extra charge. The amount you will pay is based on a percentage of your balance so its not like they are pulling these numbers out of thin air. There actually is a bottom line amount they can’t go below so don’t push your luck. Usually you can bank on your payment to be around 1% of your balance, maybe more, maybe less. So if you have $60,000 in debt count on paying around 600 dollars a month. Good news is, after completing the program the debt will be removed as a “defaulted loan”from your credit report.

If you can’t pay?

If you can’t pay the amount that you need to pay on your student loan, and believe me its best if you do…but if you can’t (unemployment, don’t make enough, etc) there is an income contingent plan in which you basically have to prove you can’t make the monthly minimum and you can send what you can. Don’t count on this doing much to your account.

Disability

You can have your student loan wiped clean providing that you can prove you are in fact 100% disabled. You will have to have your doctor fill out all the necessary paper work and send them back right away! Only then will it be considered and reviewed.

Death

Thats another way that they can be eliminated. If you die, but again it will have to be proven.

Bankruptcy

Don’t think you can include your student loans in a bankruptcy filing. These are federal, and I believe a bankruptcy is civil. However, you will have to speak with your bankruptcy attorney for the proper information, I’m not a lawyer.

You also can’t wait it out for the statute of limitations either. Again thats for the state, and of course these loans are federal.

Well I hope this helps somewhat. If you have any questions pertaining to this blog or anything else regarding your student loans shoot me an email and hopefully I can help.