Can Student Loan Rehabilitation Help You?
If you have recently defaulted on a student loan, you may just be hoping that it will go away. This isn’t an uncommon thought, but unfortunately, this is one type of loan that will not just disappear!
Why you do not want to be in student loan default
If you have a student loan default, chances are your phone is ringing off the hook. The government hires very aggressive collection agencies that will harass you to no end. On top of this, unlike many creditors who never take the time to sue, if you have a job chances are you will end up in court. Once you lose, a judgment will be issued against you. This will then turn into a wage garnishment. What this means is that the government will take a portion of your paycheck each month before you ever see it. On top of this, they will also take any income tax refund that you have coming due to you.
To make matters worse, if you have a federal student loan, there is no statute of limitations on how long you can be collected from. This means now or twenty years from now, the government is going to do everything that they can to get money from you.
The good news at there is a program through which you can rehabilitate your loan.
How student loan rehabilitation works!
Once you have successfully rehabilitated a student loan, it is no longer in default status. The record of default will be deleted from your credit bureaus. You will also be eligible for things like deferment and forbearance should you need these things in the future. One of the reasons that many people seek to rehabilitate their loans, is that it stops wage garnishment. Also, the IRS will stop seizing your income tax refunds.
The requirements to rehabilitate a loan are fairly simple. For direct, FFEL and Perkins loans, you must make 9 full loan payments over a 10 month period. Only payments that are made voluntarily by you count. (i.e., payments made through wage garnishment don’t count) Once you have made these payments, your loan is officially out of default.