College Student Loan Rehabilitation
Under the college student loan rehabilitation program, you and your student loan holder (or the Department of Education if you have a defaulted Direct College Student Loan) can agree on a reasonable and affordable payment plan for nine (9) payments over a ten month period. In many cases, you will sign a rehabilitation agreement specifying the payments and your responsibilities. A college student loan is rehabilitated only after you have voluntarily made the agreed upon payments on time and the college student loan has been purchased by a lender. Any outstanding collection costs may be added to the principal amount of your college student loan.
Loan rehabilitation can offer the following benefits for a person:
• The nine (9) voluntary on time payments you make while rehabilitating your college student loans will be subtracted from the maximum repayment term of your student loan.
• Rehabilitating your college student loan(s) will remove the default status of previously defaulted student loans at completion of the process. National credit bureaus are notified when a college student loan is no longer considered in a default status.
• After the student loan has been rehabilitated, you regain the balance of all original benefits of the Title IV college student loan program, including any remaining eligibility for deferment or forbearance, from the date of the rehabilitation.
• Repayment plans available to other borrowers with the same college student loan type may be available to you, depending on your qualifying status.
It is important to also keep in mind:
• The amount of your monthly payment after rehabilitation may be more than the original amount you paid while you were rehabilitating your college loans.
• Any interest outstanding at the time your college student loan is rehabilitated will be added to your current outstanding principal balance, increasing the total amount you will owe. Collection costs can also be added to your principal balance, increasing the total amount you owe.
• Delinquencies reported before the college student loan(s) defaulted will not be removed from your credit report history.
Make sure that you completely understand the differences in college student loan rehabilitation for the different student loan programs. For questions on rehabilitation of Perkins college student loans, please contact your school directly to establish an agreement. For FFEL college student loans, at the completion of the schedule of rehabilitation payments, a participating lender or financial institution must agree to purchase the defaulted college student loan and assume servicing of your student loan. You must continue making payments on time during this time.
Definition of Servicing: The financial institution or bank that is administering a college student loan (billing the borrower and accepting the payment).
Some of you may not have been aware that a College Student Loan Rehabilitation is even possible. So do not despair if you have had a touch time with your college student loan in not making the payments. Most financial institutions and banks want you to contact them and make arrangement to get back in there good graces. Do not just give up, talk with them and see what you can do to make the situation better for all.
