:: What Can I Do To Get Out Of Default? ::
Are you trying to get out of default? Do you want to continue your education? The following options can help you get out of default and/or regain eligibility for federal student aid.
Satisfactory Repayment Program
This program gives you the opportunity to reestablish your federal aid eligibility while still in default. To participate in this program you must:
- Make six full monthly payments that are:
- Consecutive - payments made one after another without interruption
- Voluntary - direct borrower payments, which don't include payments from state or federal tax refunds, trustee payments or wage garnishment
- On-time - within 15 days of the due date
A lump sum pre-payment doesn't satisfy the requirements for six consecutive monthly payments. You can only enter this program one time. Once you're eligible for aid, if you become more than 15 days delinquent on your loans, you'll be ineligible for any additional aid under this program.
Loan Rehabilitation
This program takes your loan out of default and removes the default from your credit report. To participate in this program you must fill out and return the Rehabilitation Application to your servicer before they receive your ninth consecutive payment. You must also:
- Make nine, on-time, full monthly payments during a period of 10 consecutive months. Payments must be:
- Voluntary - direct borrower payments which don't include payments from state or federal tax refunds, trustee payments or wage garnishment
- On-time - made within 20 days of the due date
A lump sum pre-payment doesn't satisfy the requirements for nine consecutive monthly payments. If you miss two monthly payments during this nine-month cycle, you must begin the nine-month cycle again, starting with the next on-time monthly payment.
Once you've made the nine on-time payments in 10 consecutive months and sent in your completed application, your account will be sent to a lender who'll purchase the loan. This will bring your loan out of default status and update any consumer reporting agency listings made by OCAP. You must maintain your payments until the loan rehabilitation is completed and you're contacted by your new lender.
Contact your servicer for more information on establishing payment arrangements and to request an application.
Loan Consolidation
This program gets your loan out of default and allows you to combine all of your student loans into one loan repayable to the U.S. Department of Education. To consolidate immediately, you must agree to repay your new consolidation loan under either the income-contingent or the income-based repayment plan. If you wish for any other type of repayment plan for your new consolidation loan, you must first:
- Agree to a repayment plan and begin making payments that are:
- Consecutive - payments made one after another without interruption
- Voluntary - direct borrower payments, which don't include payments from state or federal tax refunds, trustee payments or wage garnishment
- On-time - within 15 days of the due date
After making at least three such payments, your defaulted loans become eligible for consolidation.
Remember, consolidation isn't the best option for everyone. It may affect the total interest cost for your loan(s), the terms of your current repayment agreement and your loan forgiveness options. For more information about the Direct Loan Consolidation Loan program, call 800.557.7392 (toll free) or visit StudentAid.gov/loan-consolidation.
