If you didn’t make payments on your loans and are now in default, don’t get discouraged. It may seem like an overwhelming situation, but you have multiple options for getting out of default. Remember, it’s in your best interest to act quickly to resolve the default, because the consequences of default can be severe.
Options for Getting Out of Default
You have three options for getting out of default: loan rehabilitation, loan consolidation, or repayment in full.
1. Repayment in full
Repayment in full is exactly as it sounds; you can repay the full amount that you owe at any time.
2. Loan Rehabilitation
To rehabilitate most defaulted loans, you must sign an agreement to make a series monthly payments over a period of time. The monthly payment amount you’ll be offered will be based on your income, so it should be affordable.
3. Loan Consolidation
Loan consolidation allows you to pay off your loans by consolidating (combining) your loans into a new Direct Consolidation Loan.
To consolidate a loan into a new Direct Consolidation Loan, you must either
- agree to repay the new Direct Consolidation Loan under an income-driven repayment plan or
- make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.
Staying Out of Default
There are a number of things you can do to keep yourself on track and out of default:
1. Enroll in an income-driven repayment plan.
If you haven’t already, you should consider enrolling in an income-driven repayment plan.
2. Consider setting up automatic payments.
Sign up for automatic debit through your loan servicer, and monthly payments will automatically be made from your bank account.
3. Keep good records.
It’s helpful to keep important documents such as records of monthly payments, payment schedules, and notes about phone calls to your loan servicer in an organized file.
4. Stay in touch with your loan servicer.
As soon as you think that you’ll have trouble making your monthly payment, contact your loan servicer to discuss your situation—they are there to help you.
SOURCE: BLOG POST