STUDENT LOAN DEFAULT REMOVAL
As a borrower, one of the most distressing scenarios you can ever face is loan default. However, there are effective ways the Student Loan Advisory Group can help to remove your student loan default. During our initial and complimentary consultation with you, we will review your current student loan situation and help you determine the best course of action and aid you in the process of student loan default removal.
One of the best ways of fixing a student loan default is by entering a rehabilitation program — it a good start and proactive decision to get your student loan out of its default status.
With a student loan rehabilitation program, you will spend nine months under a strict payment agreement. If you successfully comply with making the required monthly payment on time every month, the default status will be removed. Payments required during student loan rehabilitation are income-based so as to not add further financial duress and encourage a successful outcome.
Although your loan is under default, you may be eligible to consolidate the defaulted student loan or loans if a wage garnishment levy has not been placed against your finances. Defaulted loans can be consolidated through the William D. Ford Direct Loan program (more commonly referred to as just Direct Loans).
By consolidating through the Direct Loan program, you can pay off the defaulted loans and begin anew with a loan under good standing – and seek more favorable loan repayment options. Some borrowers may even qualify for $0.00 monthly payments. This actually serves as a monthly payment and not a forbearance or deferment and with the Direct Loan program, any loan balance remaining after 20 to 25 years is discharged.
Taking this route can also enable you to qualify for certain student loan forgiveness programs as well. Important to note is that your interest rate after consolidating with a Direct Loan is often a weighted average of the defaulted loans, so your interest rate on your consolidated student loans may be higher – although if it gets you out of defaulted status, it can be worth it.
Another option available to those who have already defaulted on their student loans is a negotiated settlement. With a negotiated settlement, the borrower (you) are able to pay off your debt in full but for less than you actually owe. Lenders will only agree to a debt settlement if the amount is more than what they think they can recover through other options like wage garnishment or tax offsets.
Typically, lenders will approve a negotiated settlement under one of the three following payment scenarios:
- You pay the total principal balance in full plus 50% of the interest balance owed.
- You pay 90% of the principle and interest balance total (essentially, 10% off what you owe if you pay it in a single lump sum).
- You pay the total principal balance, total interest balance, plus the unpaid interest but all collection fees, late fees, and other related charges are waived.
The catch? The borrower must pay the settled amount in full within 90 days of the agreement.
Although some of the lump sum payment options seem ideal for individuals who have not defaulted on their loan, negotiated settlements are not available unless the borrow has already defaulted, does not have the financial stability for other debt recovery recourses, and/or the lump sum amount is more than what the lender may get through other collection options.
The fastest, if not always the most plausible, option to removing a default status is to pay it off in full. For most, this is achieved by seeking a personal loan to pay off the student loans (often consolidating it with other debt like credit cards or medical bills). Since your credit is marked with a defaulted status, you may be required to have a co-signer on your consolidation loan. The Student Loan Advisory Group can also help you locate private student loan refinancing lenders who are more willing to provide a new loan to help struggling individuals get out from under student debt.