According to the Department of Education, a federal student loan is considered in default if no payments have been made in 270 days. Between the last payment and default, the loan is considered delinquent. The penalties for a student loan default can be severe, and repaying the loan will be significantly more difficult. However, there is one option that you might not be aware of: Rehabilitation. Here are some things worth knowing about it.
- Rehabilitation involves you and the Department of Education agreeing on a reasonable and affordable payment plan.
- Debtors with Perkins loans should contact the schools they borrowed from instead of the federal government.
- A lender will purchase the loan, and the debtor will exit default when all the payments have been made.
- If your loan went to collections, the costs will be added to the principal balance of the loan, and interest can accrue on them.
- Any payments made via wage garnishment or legal action do not count toward debtors’ rehabilitation payments.
- Once a loan is rehabilitated, the default status will be removed, the credit bureaus will no longer list the loan as in default, wage garnishments will cease as will any income tax withholding by the IRS.
- Debtors whose loans are rehabilitated will again be able to qualify for certain benefits, including deferments, forbearances, loan forgiveness, and eligibility for additional federal loans.
- Monthly payments after rehabilitation might be higher than before.
Defaulted student loans are a very serious burden for debtors, and more information can be found here. If you are having trouble paying off your student loan debt, talking to an experienced Las Vegas bankruptcy lawyer can help you assess your options. Filing chapter 7 bankruptcy can discharge other unsecured debts, which will free up payments for your student loans.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.