Student Loans Rehabilitation Program

Through student loans rehabilitation programs, a borrower who has defaulted on a federal student loan can get back into financial shape. The US Department of Education will work with a defaulted borrower to rehabilitate his loan, as long as the borrower meets a series of conditions.

Why is it a bad idea to default? Can't borrowers just go bankrupt?
Low-interest federal student loans are lent to students who are eligible, without a credit check or cosigner. The repayment plans are generally modest, with student loan consolidation options to arrange even lower monthly payments. However, depending on a borrower's circumstances and the amount of money borrowed, some people fall into financial trouble and cannot make the monthly payments. The loan is then in default and, aside from collections, the government may garnish wages or withhold tax refunds to compensate.

When a borrower has defaulted on a federal student loan, the government will try to collect from the borrower. There isn't even a statue of limitations, or a legal time limit, when the government can no longer pursue collections, and bankruptcy won't clear the debt unless you can prove undue hardship. It's in the borrower's best interest to work with the agency as soon as possible to get these loans paid off.

How can I rehabilitate a loan before it causes a bigger problem?
In order to rehabilitate a loan that has gone into default, the borrower must make at least 9 full payments over a 10-month time period. These payments must be on time and in full. Once the ninth payment has been received and processed, the loan is restored to a normal status.

Some of the benefits of participating in the US Department of Education's student loan rehabilitation program are that the loan will no longer be in default, and you can start to repair your personal credit. Any loan conditions and benefits that were allowed before the default, such as deferment with proper qualifications, are restored. Finally, you will no longer face penalties, such as garnishing of wages or withholdings from the IRS of tax refunds.

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