Repay Student Loans » Student Loan Default

Bankruptcy and a Federal Student Loan

admin — Thu, 18 Jun 2009 20:30:15 +0000

By Richard Shelmerdine

If you are looking for information on bankruptcy and a federal student loan then you have come to the right place. You may feel that your federal student loan is making your financial life hell at the moment but it does not have to be like that. Bankruptcy is and should always be a last option. What will happen if you decide to go bankrupt though is not as bad once you think about it. It means that you will have a totally fresh slate financially. Although you may be marked by a few financial organizations for a couple of years and will struggle to get money from banks lent to you.

Firstly the main thing that you need here is communication with your federal student loan company. If you do not talk to the they will not know what you want and lots of people do this. Do not be one of them and you will find a way through this difficult financial time. Talk to them and mention your financial woes and that you may even consider bankruptcy. Because they will definitely get no money if you go bankrupt because you start over again they will let you pay at a highly discounted rate just so they get something from you. Sad but true.

Then when you have completed this stage you might want to look into something like debt consolidation. This is where you get all of your student loan and other debts that you are struggling to pay and you give them to a student loan debt consolidation organization and they pay it off for you and you pay one single monthly payment over time. The charge is surprisingly small too.

To learn how to pay of your student loan and get the great feeling of freedom that comes with paying off your student loan, Click here for Bankruptcy Federal Student Loan

Article Source: EzineArticles.com

Advantages of rehabilitating your defaulted student loan(s)

admin — Fri, 01 May 2009 19:26:05 +0000

You may want to consider rehabilitating your defaulted loan(s). Advantages of rehabilitation include:

Your loan(s) will no longer be considered to be in a default status.
The default status reported by your loan holder to the national credit bureaus will be deleted.
You will be eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility.
Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

If you are a Direct Loan Borrower:

To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.

If you are a FFEL loan borrower:

To rehabilitate a FFEL, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) may be purchased by an eligible lending institution.

If you are a Perkins loan borrower:

To rehabilitate a Perkins Loan, you must make nine (9) on-time, monthly payments of an agreed amount to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will continue to be serviced by the Department until the balance owed is paid in full.

Source: U.S. Department of Education

What are the consequences of student loan defaulting?

admin — Wed, 22 Apr 2009 19:09:52 +0000

Borrowers who fail to make a payment on time are considered delinquent on their Direct Consolidation Loans. Borrowers who do not make payments for 270 days are in default. Defaulting has severe and long-lasting consequences, as follows:

* The Department of Education can immediately demand repayment of the total loan amount due.
* The Department of Eduction will attempt to collect the debt and may charge collection costs.
* The Department of Education reports defaulted loans to national credit bureaus, damaging borrowers’ credit ratings and, making it difficult for borrowers to make purchases such as cars or homes.
* Borrowers with loans in default are ineligible for Title IV student aid.
* Borrowers with loans in default are ineligible for deferments
* The Internal Revenue Service can withhold borrowers’ Federal income tax refunds.
* Borrowers’ wages may be garnished.

It is important that borrowers with Direct Consolidation Loans stay in touch with the Direct Loan Servicing Center. Default can occur when borrowers fail to keep the Direct Loan Servicing Center up to date on address and name changes, causing billing statements to go astray. In addition, the Direct Loan Servicing Center can offer alternatives when borrowers have trouble making monthly payments. Borrowers may apply for a deferment or forbearance, or change repayment plans.

Source: U.S. Department of Education

Defaulted FFEL or Direct Loan Program loans

admin — Wed, 22 Apr 2009 19:06:45 +0000

Borrowers with defaulted FFEL or Direct Loan Program loans may be liable for collection costs incurred to collect the loans. If the holder of the defaulted loan, which may be either the U.S. Department of Education or a guaranty agency, retains a collection agency to collect defaulted loans, charges imposed by the collection agency may be added to the amount borrowers owe. This means that the amount of the Direct Consolidation Loan may include collection costs of up to 18.5% of the principal and interest outstanding on the defaulted loan.

For defaulted Perkins Loans and health professions loans, collection costs may equal as much as the amount owed at the time the defaulted loan is paid off through consolidation.

Source: Department of Education

Can I Consolidate a Defaulted Loan?

admin — Wed, 22 Apr 2009 19:04:44 +0000

Generally, Federal education loan(s) in default may be consolidated in a Direct Consolidation Loan if borrowers:

* Agree to repay the loan(s) under the Income Contingent Repayment Plan.
OR

* Make satisfactory repayment arrangements with the current loan holder(s).

If, before applying for consolidation, borrowers who want to completely clear the default notation from their credit records, they may want to consider another option: loan rehabilitation. Borrowers should contact their loan holders to obtain more information about this option.

Borrowers cannot consolidate defaulted loans under these conditions:

* If a judgment has been issued against a defaulted loan, it cannot be included in the consolidation unless the judgment order has been vacated (dismissed).
* If they are trying to consolidate defaulted Direct Consolidation Loans.
* If they are trying to consolidate defaulted FFEL Consolidation Loans unless they have made satisfactory repayment arrangements with their current loan holder OR the borrowers agree to repay under the Income Contingent Repayment Plan.
* If they are trying to consolidate defaulted Perkins or health professions loans unless they have made satisfactory repayment arrangements with their current loan holders.

Source: U.S. Department of Education

If You are Facing Loan Default

admin — Wed, 22 Apr 2009 19:01:50 +0000

For student loans authorized under Section 435(i)Title IV of the Higher Education Act, default occurs on a Federal Family Educational Loan (FFEL) program loan after a default has persisted for 270 days in the case of a loan repayable in monthly installments or 330 days in the case of a loan repayable in less frequent installments. The change is effective for loans for which the first date of delinquency occurred on or after October 7, 1998. During the delinquency period, your loan holder must exercise “due diligence” in attempting to collect the loan; that is, your loan holder must make repeated efforts to locate and contact you about repayment. If your loan holder’s efforts are unsuccessful, steps will be taken to place the loan in default and to turn the loan over to the guaranty agency in your state. Your loan holder may “accelerate” a defaulted loan, which means that the entire balance of the loan (principal and interest) becomes due in a single payment.

Once your loan is assigned to a guaranty agency or the U.S. Department of Education (Department) for collection, the following steps may be taken to recover the outstanding balance due:

The Department of the Treasury may offset your federal and/or state tax refunds and any other payments, as authorized by law, to repay your defaulted loan.
You may have to pay additional collection costs after your loan is assigned to a private collection agency for collection.
Also, you may be subject to Administrative Wage Garnishment, whereby the Department will require your employer to forward 15% of your disposable pay toward repayment of your loan.
Federal employees face the possibility of having 15% of their disposable pay offset by the Department toward repayment of their loan through the Federal Employee Salary Offset Program.
The Department may take legal action to force you to repay the loan.
Finally, credit bureaus may be notified, and your credit rating will suffer.

Once a loan is declared in default, you are no longer entitled to any deferments or forbearances. In addition, you may not receive any additional Title IV federal student aid if you are in default on any Title IV student loan until you have made payments of an approved amount for at least six consecutive months.

Source: U.S. Department of Education

Does a bankruptcy discharge relieve an individual of his obligation to repay a student loan?

admin — Wed, 22 Apr 2009 18:13:15 +0000

Whether a bankruptcy discharge relieves an individual of his or her obligation to repay a student loan or grant overpayment is now determined by whether a court has ruled that repayment would impose an undue hardship on the borrower and his or her dependents. If the bankruptcy was filed on or after October 8, 1998, the loan or grant obligation is not affected by a bankruptcy discharge unless the debtor received an undue hardship ruling from the court.

Prior to October 1998 changes in bankruptcy law, whether a loan or grant overpayment was discharged in a bankruptcy depended on different rules, depending on when bankruptcy was filed, how long the student loan had been in repayment, and what kind of student loan the debtor had received. Generally, loans or grant obligations owed and in repayment for more than five years, and later seven years by the time the borrower filed for bankruptcy relief were dischargeable by reason of the age of the debt. Debts owed and in repayment status for shorter periods were dischargeable only if a court ruled that repayment would pose an undue hardship. In addition, a general discharge received in a Chapter 13 (wage earner plan) bankruptcy that was filed before November 5, 1990 was sufficient to discharge a student loan or grant obligation without regard to how long the debt had been owed, even if the debtor failed to prove that repayment would pose an undue hardship.

You should present documentation regarding your bankruptcy case to Department representatives, who can advise whether the Department considers bankruptcy law to relieve you of the obligation to repay this debt. You may seek advice from your bankruptcy counsel in this matter as well.

If your bankruptcy petition was dismissed rather than discharged, then none of your debts, including your loan, were discharged.

Source: U.S. Department of Education

Repaying Student Loans Held by the U.S. Department of Education

admin — Wed, 22 Apr 2009 18:04:35 +0000

After you graduate, leave school, or drop below half-time enrollment, you have six or nine months before you begin repayment. You will receive information about repayment and will be notified by your loan provider of the date loan repayment begins.

Addressing Your Defaulted Student Loan

If you default on your student loan, the maturity date of each promissory note is accelerated making payment in full immediately due, and you are no longer eligible for any type of deferment or forbearance. Continued failure to repay a loan in default may lead to several negative consequences for you over the long-term including having your wages garnished, your Federal income tax withheld, and losing your eligibility for other federal loans like FHA or VA.

However, there are now more ways than ever before to repay your defaulted student loan and certain programs can even remove your loan from its defaulted status. Determining which repayment option that is right for you depends on what your objective is.

Source: U.S. Department of Education