Default Avoidance AssistanceCan be avoided through various available government and private programs
Millions of student loan borrowers are senselessly defaulting on their debt while failing to take advantage of programs meant to protect them financially. With all the repayment plans and programs available to borrowers, it should be nearly impossible to default on a student loan. Yet, it happens because borrowers fail to identify, recognize or navigate the information and sources available to help. At DocuPrep Xpress, we have friendly and knowledgeable advisors who can provide the guidance you seek to avoid becoming a default statistic. Consultation is free. Call (888) 231-2443 today.
What are the consequences of defaulting?
l 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 Education 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, 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.
What solutions are available to assist with a defaulted loan?
Rehabilitation or Consolidation?
There are many benefits to rehabilitating a defaulted loan before consolidation. If you consolidate a defaulted loan without rehabilitating it, your credit record continues to show a default status on the loan. This is true even after the consolidation loan pays off the defaulted loan in full.
- Consolidating a defaulted loan will result in your credit report bearing the notation that the loan was in default but then “paid in full.” This notation will remain on the credit report for up to seven years. While a “paid in full” notation is preferable to an unpaid default, there is still the possibility that lenders will deny you future credit, such as mortgages, auto loans, or credit cards because of this notation. However, if you rehabilitate a defaulted loan before consolidating it, the loan holder will update your credit record to no longer reflect the default status of the rehabilitated loan or loans.
- Rehabilitating a defaulted Direct Loan or FFEL loan requires that you 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. Rehabilitating a defaulted Perkins loan requires twelve (12) on-time monthly payments. Contact your loan holder to obtain additional rehabilitation terms and conditions for your loan type.Keep in mind that if you default on your loan, you are liable for any collection costs incurred to collect the loan. If you pay off the defaulted loan by taking out a Consolidation Loan, the amount you borrow must be enough to pay off your defaulted loan, including principal, interest, and collection costs. This means that the amount of the new loan may need to be up to 18.5% larger than the principal and interest outstanding on your defaulted loan. Both rehabilitation and consolidation will reinstate your eligibility for additional Federal student aid under Title IV of the Higher Education Act (Pell Grants, FFEL and Direct Loans etc.)
If you are currently facing the stress of defaulting on your student loan, help is available. Free advice from a Student Loan Advisor is available from DocuPrep Xpress.
Call today: (888) 231-2443
Experience and Professionalism
DocuPrep Xpress has friendly and knowledgeable Student Loan Advisors with the experience of helping thousands prepare documents and take the necessary steps for a successful qualification. DocuPrep Xpress helps you navigate the stressful steps to qualify for government approved programs. There are multiple available programs designed to ease the financial stress many are facing when dealing with their student loan payments.
For some people, a reduction in their overall student loan payment is all they need to get back on stable financial ground again. It’s never too late to apply and qualify for payment relief programs. Contact a Student Loan Advisor at DocuPrep Xpress for a free, no cost or obligation consultation. A 10-minute phone call is all you’ll need to determine what payment programs are available so you can stop stressing and start saving!
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