Default Help!

[Anonymous]

I am needing some help or rather, my son is needing some assistance maybe even legal. My son had been told that he could rehabilitate his student loans which total only a little over five thousand dollars. At first he was reasurred that he could rehab his loans which would have made his loan amts over fifty dollars per month. I sent a payment in of $25.00 on it last week. I called to make sure that it had posted to his acct and it had, but the person on the phone informed me that he is not eligible for rehab because the loan had defaulted three yrs. ago and had gone thru rehab already. Now his payments will be $121.00 per month. A collection agency does not have his acct. The acct is with the student loan people. Is there a way that his acct can be negotiated either for the amount to be lowered per month or is there anyway that it can be rehabilitated?

[LynnInMN]

Unfortunately you can only rehab a default once and there is no way the CA would have known that the loan was previously rehabbed. 

Now that he is not eligible for rehab, unless he chooses to consolidate his defaults, his payments will be accelerated.  He is no longer eligible for "reasonable and affordable payments" since he is no longer persuing rehab. 

[Anonymous]

Btw, what is "Rehabing" a default?  Can I do this on my student loan?

Thanks

[Nectarine]

"Rehabbing" is basically paying on time, every time, for twelve consecutive months.  To me, it's a bum rap if you have Federal loans, because you can consolidate those with the federal government and get out of default in the next month (not next year).

http://loanconsolidation.ed.gov/

Of course, that only applies to government-backed loans, so private loans can't be consolidated that way.  I recommend it to everyone with student loans because they have income-contingent repayment options that can be set at $0 if you make only a little bit and can't afford to pay more.

[LynnInMN]

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@Nectarine wrote:

"Rehabbing" is basically paying on time, every time, for twelve consecutive months.  To me, it's a bum rap if you have Federal loans, because you can consolidate those with the federal government and get out of default in the next month (not next year).

http://loanconsolidation.ed.gov/

Of course, that only applies to government-backed loans, so private loans can't be consolidated that way.  I recommend it to everyone with student loans because they have income-contingent repayment options that can be set at $0 if you make only a little bit and can't afford to pay more.

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Obviously you dont know a lot about rehab.  Rehab is 9 payments (12 for Perkins only).  With rehab the negative information from the guarantor is removed plus if you have a defaulted Direct Loan, the collection costs are waived when the rehab funds.  Hardly a bum rap.

[Nectarine]

Well I tried to rehab my perkins loan, and oddly payments are every month.  That's where the twelve consecutive payments mention came from -- because that was the situation with the perkins loan.

I do consider rehabbing to be a bum rap if you are still in college.  It makes it nearly impossible to go to school in a lot of the US -- because your loan is still defaulted, which means you can't qualify for any federal grants or loans and many schools consider Pell eligibility to be the basis of need-based prgrams.  So in my case, I was looking at being out of school for at least a year to take care of a loan so small that it would be paid off before the end of the Rehab period (but I didn't have the money anyway).

For a lot of people, they don't want a break in schooling (and some upper-level programs boot you if you don't go continuously), so since we are Mid-Semester right now I think this is especially pertinent info.

If you go the consolidation route, you still have some negative remarks on your report.  So that's the tradeoff:  You can continue going to school, but your credit will be lower in the meantime.  Of course, this is all a moot point anyway if you don't have federally-backed loans but this is an option to consider for the majority of college students.

Message Edited by Nectarine on 10-22-2008 12:30 PM

[LynnInMN]

You regain all financial aid eligibility after 6 months of payments.....includes both grants and loans.  You really shouldnt be waiting to go back to school to get your loans out of default.

[Nectarine]

I didn't wait until I was going back to school to clear them up.

And as for the 6-month eligibility thing, if that is the case then the OP needs to make sure that her school is crystal-clear on it because I had THREE SCHOOLS' financial aid departments tell me that was Not The Case.  Sorry for the caps, but my browser goes nust when I use bold.