Earning a college degree is a great way to increase your earnings potential and make you more sought-after as a professional. But it won’t necessarily protect you against everything life throws your way, like a job loss, unexpected expenses or any other financial hardship that could take you by surprise.
If you’re in one of these situations, you know how difficult it can be to keep up with your monthly student loan payments when you’re faced with financial setbacks. Situations like these can lead to late payments, default and eventually collections and wage garnishment.
Thankfully, the Department of Education created a program specifically for this type of problem. Through the Student Loan Rehabilitation Program, you can get your defaulted federal student loans back on track, and regain access to a host of other benefits.
When you’re late on your student loan payments for more than nine months (or 270 days), your loans will go into default. At this point, you’re probably getting phone calls from debt collectors, who want you to pay the entire balance on your loans.
By getting approved for the Student Loan Rehabilitation Program, the default status of your loans will be removed completely. What’s more, your lenders won’t be able to garnish your wages any more, plus any collections activities will stop immediately.
If you work in one of the many professions that offer loan forgiveness, or you’re eligible for one of several other loan forgiveness programs, you won’t be able to take advantage of these programs while your student loans are in default. Once you’re out of default, however, these programs could help you become debt-free in no time.
Loan forgiveness programs can wipe away your debt – or a large portion of it – when you meet each program’s requirements. So, the sooner you’re able to get your loans out of default, the sooner you can enjoy freedom from your student debt, which is another good reason to apply for the rehabilitation program.
Your credit score could take a big hit when your loans go into collections and default. So, unless you’re able to pay off your loans entirely, which isn’t the case for most borrowers, or ready to have your wages garnished, you’ll have two choices: either file for student loan bankruptcy (which is sometimes possible, but difficult) or sign up for the rehabilitation program.
The Student Loan Rehabilitation Program not only stops the collections and default process, it removes this status from your credit history. This could mean a nice boost to your credit score, plus a cleaner credit history that enables you to secure more loans or credit in the future. In some cases, borrowers have seen their credit score jump by 50 points or more after finishing the rehabilitation program, making it one of the biggest benefits to getting your finances straightened out.
In addition to losing forgiveness benefits when your loans go into default, you’ll also lose access to other federal student loan repayment programs that can make your loans more affordable. Furthermore, you won’t be able to get any new loans as long as your loans are in defaulted status.
After you’ve successfully completed the rehabilitation program, however, you can begin applying for a number of repayment programs available from the DOE. These programs include:
These repayment programs base your payments on your discretionary income – or the money you make after paying for necessary expenses and your family size. This can drop your payments significantly each month but also lengthen your repayment terms, meaning it could cost you more in interest over time while making loan repayment much more manageable.
Are your loans in collections or default and you’re looking for a way out? Discover how the Student Loan Rehabilitation Program can help by filling out our online form or calling (800) 771-6358 to speak with a student loan specialist. We can walk you through the process and even help you get started!