Everyone knows that student loans are a drag. These loans can be difficult to manage and usually require an ongoing obligation to repay. Student loans can’t be discharged in bankruptcy; they have high-interest rates, and repayment plans are often stretched out over many years. They’re also included in your credit report and can hurt your credit score.
Paying Your Student Loans
If your student loans end up in collections, your loans are considered in default. As long as your loans remain in default, there are some serious potential consequences: Wages can be garnished and income tax refunds may be taken. You can become ineligible for federal financial aid, ineligible for deferment on your loans, and lose subsidized interest benefits. Defaulted student loans will also appear on your credit report for up to seven years, negatively affecting your credit score and your ability to get other types of loans.
A Program to Help You Pay Back Your Loans
Fortunately, there is one way to keep your student loans from hurting your credit score and removing your loans from default status. It’s referred to as the student loan rehabilitation program. This program allows you to get back on track with your payments if you’re having difficulty making them. It also helps improve your credit score!
The rehabilitation program is available to borrowers who have fallen behind on their payments. To qualify, you must make nine consecutive monthly payments on time. Once you’ve completed the program, your loan will be considered current and in good standing. Most importantly, prior late payments will be updated as “on-time” on your credit report. This will help improve your credit score by showing that you’re responsible for your debt.
The rehabilitation program is a great option. It’ll help you get back on track and improve your credit score at the same time. If you successfully rehabilitate a loan, the record of default is removed from your credit history. Also, you may become eligible for Public Service Loan Forgiveness (PSLF). As long as you remain in public service throughout repayment, all remaining balances are forgiven at the end of PSLF’s 120 qualifying monthly payments. Federal direct loans and Federal Family Education Loans usually qualify for rehabilitation. Private student loans aren’t eligible for rehabilitation.
How To Get This Option
Contact your lender to learn more about the program and how to enroll. This program allows you to get back on track with your payments if you’re having difficulty making them. It also helps improve your credit score!