Are you experiencing default or wage garnishment on your student loans? Explore your options for student loan rehabilitation to save your credit and take control of your financial freedom.
If you have student loans in default and want to get your payments back on track, rehabilitating your student loan can help you regain your financial footing and repair relationships with your lenders.
Here you’ll find helpful information from our experts on how student loan rehabilitation works and how to take advantage of this valuable program.
When Loan Rehabilitation is a Good Idea
Student loan rehabilitation is one of the best options for getting your loans out of default. If you’ve missed several payments for any reason – such as job loss, financial hardship or unexpected expenses – rehabilitation allows you to pick up your loans where you left off without further damaging your credit.
Unlike other repayment programs, your repayment period doesn’t start over as part of rehabilitation. This means if you’ve already made payments for several years towards your loans, you won’t have to start over with a new, possibly longer repayment period.
One thing to remember: You can only go through the rehabilitation process once for each loan, so make sure this is your best option before getting started.
How to Qualify for Student Loan Rehabilitation
Student loan default happens when you’ve missed your monthly student payments for more than nine months (270 days). Once your student loans are in default, recovering these loans can be difficult, but there are a few ways you can get out of default for good.
To get started, you first need to make sure your loans qualify for the program. Currently, rehabilitation is only available for the following federal loans:
- William D. Ford Federal Direct Loans (Direct Loans)
- Federal Family Education Loan (FFEL) Program Loans
- Perkins Loans
Finding out if you qualify for student loan rehabilitation is usually a quick and easy process. It involves contacting your loan servicer directly, or by learning more about your options from one of our experts. The sooner you take care of your student loans, the sooner you’ll be in a better place financially.
Find out if you can rehabilitate your student loans for free today.
How Student Loan Rehabilitation Works
If you have student loans that qualify, your next step is signing a new written rehabilitation agreement with your servicer. By signing this agreement, you’re committing to making nine voluntary on-time payments within 20 days of the scheduled due date each month over a consecutive 10-month period.
If you’re a qualifying member of the U.S. military, you might be eligible to have your payments put on hold during active duty, as long as you resume payments after it’s completed.
The amount you pay each month will depend on your discretionary income, which considers your annual income, family size and your state’s poverty level. Your loan servicer will calculate your monthly payments based on 15 percent of your annual discretionary income and break this amount into 12 payments for the year.
If you’re unable to make payments under these new terms, your loan servicer may agree to an alternative monthly payment plan based on the money you have left each month after paying other monthly expenses. Depending on your situation, this new amount could be much lower than the original student loan rehabilitation agreement.
What Comes After Rehabilitation
After your loan is rehabilitated, you’ll want to make sure you check with your servicer for the best payment plan for your financial situation. Sometimes servicers will automatically enroll you in the 10-year Standard Repayment Plan after rehabilitation, which may not be affordable. This makes it a good idea to look at other, more reasonable repayment options.
Benefits of Student Loan Rehabilitation
When making payments during the nine-month period, any wage garnishments or Treasury offsets may continue until the period has ended. None of these involuntary payments will go towards your rehabilitation agreement. However, once the nine-month period is complete, your student loans will be considered out of default, and any wage garnishment or offsets will stop immediately.
Once your student loan is out of default, you will regain your eligibility for other types of loans and programs, including:
By rehabilitating your loans, you’ll once again get access to student financial aid. But more importantly, phone calls from collectors will stop and defaulted loans will no longer show up on your credit history.
Again, please note: student loan rehabilitation is only available one time. This means that if you default on your new rehabilitation agreement, you won’t be able to repair it a second time.
For more details on student loan rehabilitation, speak with student loan specialist by phone at (800) 670-4196.