Should You Rehabilitate Or Consolidate Defaulted Student Loans?

Should You Rehabilitate Or Consolidate Defaulted Student Loans?

If you've defaulted on your student loans, there are two major ways to get out of defaults.  If you want to know whether you should rehabilitate your student loans or consolidate them although. There are two main options, there are really three options for getting your student loans out of defaults. But, the third option is to pay the entire balance in full immediately and that's not really an option. Because if a borrower could pay their entire student loan balance in full. It's unlikely they would have defaulted in the first place. We're going to talk about the two realistic actions for most borrowers.

Should You Rehabilitate Or Consolidate Defaulted Student Loans?

Should You Rehabilitate Or Consolidate Defaulted Student Loans?

Student Loan Rehabilitation

Rehabilitation is set up with your student loan holder, also known as your student loan servicer. You'll need to set up a monthly payment and then make nine and monthly payments within 20 days of their due date in a duration of 10 months. That means you need to make nine monthly payments on time right in a row. And, after that, your student loans will be in good standing. The biggest advantage of rehabilitating your student loan is that the student loan defaults get removed from your credit history entirely.

Your late payments will still show up on your credit history, but the default itself will not in order to do this. You're going to have to contact your loan servicer and get that monthly payment set up. If you think that the monthly payment they set up which is 15% of your discretionary income is too much. You can actually ask them to adjust that monthly payment. You're going to have to provide both information about your income and your expenses. There's a form that you fill out, called the loan income information and expense documents.

Student Loan Consolidation

Student loan consolidation you'll have to agree to repay that loan with an income-driven monthly repayment plan. But, once your loan is consolidated it gets removed from a defaulted state. The biggest advantage of student loan consolidation is that it's faster than rehabilitation. You don't have to wait nine months to get your student loans out of default. unfortunately, your default will still show up on your credit history.

This is the primary difference between these two choices when you rehabilitate your student loans. The default gets removed from your credit history. And when you consolidate your student loans, default stays on your credit history in order to student loan consolidation. You're going to need to apply for a direct consolidation student loan.

Both of these options will put your loans back in good standing and make you eligible for federal repayment plans. You are Eligible to borrow new student loans. If you're continuing your education and eligible for all the federal student loan benefits. The main difference again between the two is that rehabilitating your loans removes the history of default from your credit history and consolidating your student loans. Does not consolidate your student loans is a little bit faster and resolving the defaults. And student loan rehabilitation takes nine months. If you've tried these steps are feeling stuck you can always call the Department of Education default resolution group. I hope you found this article helpful.

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