Student Loan Default Help

Did you know that each year one million students who borrow loans enter into defaults? Here’s a fact: by 2023, 40% of borrowers will default on their loans. The default rises higher for students who enrolled in a for-profit school. The sad part is, it will take some people more than a decade to pay off their debt. That’s horrible! But student loan default help can aid you in getting your life back.

The best way is to avoid default at any cost. If you’re already in default, there is hope and available options for you to climb out of this rabbit hole.

Before we proceed, here’s a bit of encouragement. First, you’re not alone. Second, it’s not like you deliberately defaulted on purpose. Thirdly, it has happened. Now you need to focus on federal student loan default help. After you get your federal student loan out of default, get an affordable monthly payment plan, and rid yourself of student loan default.

In this post, we will cover everything about student loan default help and assist you in recovering from student loan debt. But before we talk about federal student loan default help, here’s something you need to know. There was a proposed budget that President Trump released for 2020. The new budget will affect your student loans, and you should know before you make any decisions.

If you’re ready, let’s dive right in!

Trump’s Plan For Student Loan Debt: Not Looking Good

President Trump proposed a new budget that may affect your student loan debt. Today, student loan debt is the second-highest category of consumer debt. Currently, the student loan debt statistics show that 45 million US citizens owe $1.6 trillion, according to Forbes.

Here’s what you should know and what to do if it takes effect.

New Proposals For Student Loans

The new budget requests $66.6 billion for the US Department of Education. That is a 7.8% decrease from current funding, according to Forbes. Among other initiatives, the budget includes several proposed changes that can affect your student loans and your student loan repayment strategy:

  1. The Elimination Of Subsidized Student Loans

If you are enrolled in school, the federal government will no longer pay the interest costs on your federal student loan. It means your student loan debt will be higher.

  1. Cancellation of Public Service Loan Forgiveness (PSLF) Program

If the proposal is accepted, the budget will eliminate the Public Service Loan Forgiveness program. The program forgives student loans of those who are full-time employers in a non-profit organization or qualified public service. Currently, the borrowers in this program get forgiveness after 120 monthly payments.

  1. Borrowing Limits

The budget limits the lifetime and annual amount that graduate students and parents borrow for school. Both the Parent PLUS Loans and Graduate PLUS Loans are inclusive. The PLUS loans are relatively expensive, but you can still refinance student loans to a lower interest rate. You should know that the student loan refinancing rate dropped again to 1.89% this month, February.

  1. Repayment Change For Student Loan

You can still get student loan forgiveness through a single-driven repayment plan. Under a much easier plan, undergraduates can get rid of their loans faster and receive loan forgiveness for your student loan after 15 years. The proposal would forgive the remaining federal student loan balance five to 10 years quicker than the current income-driven repayment plan.

There are no plans to cancel student loan debt. If the proposal gets approved and implemented, it would be best if you had a student loan plan.

Now that you know about President Trump’s budget proposal, let’s find out how the federal student loan help can save you from your default state.

The Two Types Of Student Loans

Knowing the two types of student loans is vital in getting you out of student loan default. Generally speaking, there are two types of student loans which are:

  1. Federal Student Loans
  2. Private Student Loans

Federal Student Loans

Federal student loans fall into the government’s FSA program. In the program, you can find many different loans with different names:

  •  Federal Family Education Loans
  •  Direct Loans (subsidized and unsubsidized)
  •  Parent PLUS Loans
  •  Stafford Loans
  •  Perkins Loans

You can acquire these loans when you fill out a FAFSA form and submit it to the Department of Education. Federal Student Loans are eligible for income-based repayment plans. They also qualify for forgiveness programs and cancellation. In case a borrower dies, they cancel the debt owed. They don’t follow your family and loved ones. These are the excellent features of the federal student loans program.

There are bad ones though, in fact, two of them.

First of all, the federal student loans don’t have limitations, which means you’ll pay even during your retirement years, if you haven’t paid off your debt yet. Don’t worry. You can get social security if you are repaying a loan.

Secondly, when you are in default, the government will take your tax refund, take your wages on legal orders (wage garnishment), and prevent you from acquiring your future financial aid. They can accomplish all these without a court order. That’s harsh!

Private Student Loans

Private student loans are made outside the Federal Student Aid program. Ideally, banks make private student loans. They are not the only ones, though. There are credit unions, charitable foundations, and more. Here are the first things to know about private student loans:

  • They don’t offer repayment plans
  • They’re limited
  •  If you’re in default, they’ll not provide you a rehabilitation program
  • They cannot take away your paycheck on legal orders, unless they get a court order to do so.
  • They will go after a family member for their money when the borrower dies.

Now that we know about student loans, let’s find out more about student loan default help.

What is Student Loan Default Help?

Student loan occurs when you fail to pay your loan, and you were not in forbearance or deferment. The definition works for private student loans, not federal student loans. For you to default in federal student loans, you have to miss nine months of payments or 270 days. Until then, your student loan is delinquent, not in default.

What Is The Difference Between Default And Delinquency?

The significant difference is the government’s power of collection. Let me explain. When your loan falls in delinquent state, your loan servicer (Navient, FedLoan, Navient, Nelnet, etc.) cannot collect it from you by force. What they can only do is demand the payment and send a negative report to the credit rating bureaus. But when your federal student loan is in a default state, your loan servicer has the power to send your account to collections. That’s where you have to worry about social security offset and taking your paycheck by force.

The student loan default help has been established to provide you with the best way to get out of student loan default, and stick to affordable monthly payments.

Approved Ways To Get Out Of Student Loan Default

The best way to prevent falling into default is to make your monthly payments. Even when you get out of student loan default, you still have to make monthly payments. But we know that with private student loans, and sometimes with federal loans, it’s not always possible to make monthly payments.

Sometimes, there is not enough left to pay your student loans monthly – at least not what the government is asking. Forbearance and deferments can help you in the short term. But if you keep at it in the long run, they’ll cause tremendous financial strain by making your loan balance grow at a faster rate.

What Are Deferment And Forbearance?

Well, both the deferment and forbearance can stop your monthly payments temporarily, and allow you to catch up on your late payments. That’s a good thing. However, when you use them, the loan payments and unpaid interest will be added to your principal balance through the student loan interest capitalization.

So what can you do if you want to avoid student loan default? Federal student loan default help can be of great help to you. But the most important thing is to be sure that you honestly can’t afford the payments.

There are a lot of borrowers who were told by their loan servicer that they would be a certain amount of dollars each month. But when you take a look closely, you’ll find out they could pay lower if they had numbered the size of the family, and chosen the best repayment option for their student loan debt.

Remember that this option is for federal student loans, which provides loan repayment plan options based on your income. The best way for a private student loan (apart from refinancing) is the forbearance and deferment options. When the forbearance and deferment ends, you can pay under an income rate reduction plan.

There’s a discrepancy in paying your loan debt, and it makes sense if you take a magnifying look. Here’s the thing, when you call your loan servicer, and ask for options for repayment, the rep looks through a script like a routine. It’s not as if the rep has an in-depth knowledge of the whole repayment plan. The rep’s experience is mostly based on what is scripted down. So the rep asks questions based on the script and repeating what they think the rule says, and not what the rules actually say.

Are Your Loans In Default? Here’s How To Find Out

There’s no simple way to find out if you’re in default unless you check your credit report. That’s for private student loans. You have to call your loan servicer and find out about your loan status. However, it is easy for federal student loans. If you want to find out if you are in default, create a Federal Student Aid ID and visit the National Student Loan Data System.

The website has a list of all federal student loans together with their statuses. When you visit your section, any loan with this symbol “⚠️” is in default.

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What Happens When Your Student Loans Go Into Default?

When your student loan goes into a default state, your loan will go to collections, and the credit bureaus will get negative information, which will decrease your credit score. What happens next will depend on your private student loan or your federal student loan.

Federal Student Loans

Two things happen when you default on a federal student loan.

  1. Your loan servicer will take your loan to the Default Resolution Group or Debt Management & Collection System. They are the Department of Education’s collection unit.

The DRG will either send your loan to a private debt collection agency or keep the loan. If they send it to the debt collection agency, you’ll have to contact the private agency and find out your options to get out of default.

  1. Your loan balance will rise higher. There’s a default trigger that will trigger the interest on your loan and add it to your principal balance and collection fees, which will then be assessed. A borrower’s loan balance can shoot from $40,000 to $70,000 when they default. Thankfully, the government has agreed to waive the collection fees if you manage to get out of default. That sounds good.

Private Student Loans

It’s good to know that when you get to the collection stage, the threatening phone calls and letters will come regularly. They will call every relative or close associates, including your job and ask you to pay an absurd amount of money in a short amount of time. If you don’t pay, they will build a lawsuit against you.

It’s really not their fault if you take a different perspective. That’s the only way to collect debt in private student loans. Since they can’t legally take your paycheck, they will use any means to get your money.

If all the methods they try don’t work, they’ll take your loan from a collection agency and send it to a law firm. If the law firm can’t collect the money from you, they will have the authorities sue you. Now, it’s not sure how long it takes for them to sue you. But according to some experts, it can take up to six years before they begin filing legal procedures.

Let’s talk more about how long it takes to get sued.  As part of the federal student loan default help, this can assist you to come out of default.

Statute Of Limitations Of Private Student Loans

As explained earlier, there are no limitations for federal student loans, but private student loans have a statute of limitations, which varies from state to state. The statute of limitations refers to how long your loan servicer has to sue you for repayment. If the limitation expires, your loan servicer can’t sue you, but your student loan won’t disappear.

Your loan servicer may use other means to collect the debt, but not through the court system. Debts with written contracts have a statute of limitations from three to 10 years, depending on the state you live in. The collective years used by 22 states is six years, according to InCharge Debt Solutions.

If you’re sued, the court can use different statutes based on where they filed the lawsuit. If you’re not sure of which law applies in your state, you can hire a lawyer to help you. You’ll likely have to pay for the lawyer’s services, but he should be able to know whether your limitations have expired. And also, he should be able to determine if you can dismiss a lawsuit.

When Does The Statute Of Limitation Begin?

The start dates also depend on state law. Typically, a loan’s limit would start with the following:

  •  The Last Payment You Completed

Let’s say you live in a state with six years of statute limitations, and you made the last payment in 2020. Your loan servicer has from January 2020 to January 2026 to sue you over your loan debt.

  • The First Payment You Missed

The limitation is the same as the example above. The statute limitation will prolong until January 2026 from the time the first payment is missed.

  • When Your Student Loan Debt Defaulted

For private student loans, the default timelines vary. According to the Consumer Financial Protection Bureau, the average length is 120 days. However, your student loan can enter default when you miss a single payment.

What Happens Next When Your Statute Limitation Expires?

If your loan servicer fails to tell you the expired date of your statute limitation, you’ll have a court case. However, based on your statute of limitations, you can present your defense as no longer collectible or time-barred. When your student loan debt expands than the limitation set, it is considered as time-barred. That means your loan servicer doesn’t have a legal right to sue you, but the debt collectors can.

If the court agrees with you, your loan servicer can still demand their debt, depending on the law of your state. However, they won’t have access to the collection tactics the court may have agreed to, like taking your wages by force or placing a lien on your property. Also, they cannot file a lawsuit against you. All their actions must comply with the Fair Debt Collection Practices Act (FDCPA). The practices include the loan servicer giving you an honest answer when your statute of limitations expires.

You can collect your student loan in default through the tax refund garnishment and wage without any court order, which makes the limitations unnecessary for these loan debts. Getting your loans out is the best way to stop and avoid collection actions.

Is It Possible To Restart the Statute of Limitations On Your Student Loans?

Yes. It’s possible to restart your statute of limitations on your student loan debts. However, the actions required to restart varies from state to state. But it may include:

  •  Promising to repay your debt in writing
  •  Paying any significant amount towards your loan debt
  • Accepting that you owe the debt

The FDCPA prohibits any tricky actions used by debt collectors to restart your statute of limitations. If you feel that they’ve tricked you, contact your lawyer or file a formal complaint to the Federal Trade Commission and let them take it from there.

Is It Right To Settle Your Student Loan Debt?

Your loan servicer is more likely to accept your student loan settlement for less than you owe. But there’s no upside to it. Some states prevent debt collectors from pursuing you for their debt after the limitation expires. And honestly, from the financial standpoint, if your statute of limitation expires, all your unpaid loan debt and default will soon add to your credit history after seven years.

It’s also unclear if pursuing a settlement will equal acknowledging your debt, which can restart your limitations. In this situation, please consult a lawyer who is an expert in student loan debt.

Student Loan Default Help: Two Ways To Get Out Of Student Loan

The federal student loan default help typically has two options to help you get out of debt:

  1. Consolidation or
  2. Rehabilitation

Consolidation is not necessarily better than rehabilitation. Consolidation is usually faster and more comfortable than loan rehabilitation. You can face difficulties if you don’t understand the loan rehabilitation process. But consolidation has a higher loan balance than rehabilitation.

Consolidation causes both your collection fees and unpaid interest to accumulate to the new principal balance of your Direct Consolidation Loan. So if you are not in a rush to come out of default, we suggest rehabilitation as the best course of action.

A default on your debt damages your credit score, which makes it difficult or nearly impossible to get credit approval in the future.

Private student loans don’t have a rehabilitation program, and you won’t find a lender who is willing to refinance your student loan default. Due to that, there are two options you can take to help you out of default if you’re on private student loans.

  1. Pay your loan balance off by settlement or in full
  2. Pay your previous due payments

Student Loan Default Help: Five Steps To Get Your Federal Loans Out Of Default

There are five ways to get out of student loan default. They are:

  1. Identify all your federal student loan debt
  2. Find out which loans are in default
  3. Find out who has your defaulted student loans
  4. Confirm your preferred option to get out of default
  5. Complete your loan rehabilitation or loan consolidation

If you want to know which debt collection agency has your loan debt, use the National Student Loan Data System. After logging in, the loans that are in default will have this emoji icon “⚠️” placed right next to them. Next, click the number next to the loan and scroll down to the page. At the bottom of the page, you’ll find the current loan servicer, loan holder, and a guaranty agency depending on the type of federal student loan you have.

You may need to contact the Default Resolution Group or Default Management and Collection Systems. When you do, they’ll tell you to enter your social security number and birth date. Then, they’ll ask you to contact your private collection agency handling your loan.

That’s not all.

Since the messages are automated, it won’t tell you if your defaulted loans are with multiple collection agencies. So don’t depend on the automated messages, instead, call them. You can do that by putting your SSN/DOB into the system. Wait for a second, maybe more, and they will connect you to a live operator. After connecting with the live operator, you can ask how many defaulted loans you have and which agency has them.

How Long Does it Take To Get Your Loans Out Of Default?

It can take a few hours or ten months. How fast you need to get your loans out of default depends on the type of federal loan you chose and the options you plan to use.

Private Student Loan

You can get out of default within a day on the private student loan debt. To accomplish that, you need to clear your previous debts, which gets you out of default. From time to time, you can avoid making payments by asking for forbearance. If that’s the option you take, they will add the forbearance to your previous due payments. Thus, getting you out of default.

While this is great, there is a disadvantage.  The agency will add your previous due payments to your principal balance. From then on, you’ll pay interest upon interest.

Federal Student Loan

Two options help you out of default: loan rehabilitation and consolidation. A Direct Consolidation loan can get you out of default in approximately two or three months. Loan rehabilitation can get you out of default in nine to ten months.

How The Government Collects Student Loan Default

The government has the authority to collect your default loans. It is this authority that if you have to choose between a private student loan or a federal student loan, choose the private student loan. The private student loan has limited authority to collect default loans from you.

When you’re in default, the government can:

  •  Offset your tax refund
  •   Prohibit you from acquiring a new federal financial aid
  •  Deny you from loan forgiveness programs
  •  Give you a difficult time from getting approved for a mortgage
  • Issue an order to collect 15% of your disposal pay. (Disposable pay is the fee left after all deductions are completed by other laws such as health insurance premiums, taxes, social security)

What Happens If You Defaulted Twice On Your Federal Student Loan?

After the second default on the same student loan, you are no longer eligible for a rehabilitation program. The best option left for you is the Direct Consolidation Loan. But the consolidation is an option if:

  • You have another student loan to consolidate 
  • If there is no garnishment on the loan

If your default loan is in the Federal Family Education Loan (FFEL), then you can consolidate it with the Direct Consolidation Loan. You don’t need another loan to consolidate.

If the two points listed are true, then you can get out of default through consolidation. But if one or all the points are false, then the only option is to file for chapter 13 bankruptcy. Chapter 13 bankruptcy laws have a unique rule that can allow you to bail out of default into an income-driven repayment plan. You can speak with your bankruptcy attorney if the option is available to you.

What Happens When You Get Out Of Student Loan Default?

When you get out of student loan default, this is what happens:

  1. You Cannot Settle

When you get out of default, you can’t pay off your student loan in a lump sum with a discount. You have to negotiate a settlement with them while you are in default. Once out of default, you have to pay your balance in full. So, if you want to settle your debt but don’t have the money to pay off in one go, you may want to consider keeping your loan in default.

If you keep your federal student loan in default, set up a voluntary payment agreement, not a loan rehabilitation agreement. A voluntary agreement will keep you away from wage garnishment. However, it won’t stop tax refunds from being offset.

  1. Eligibility For Federal Student Aid

You can get federal student aid after six consecutive payments in 20 days of the due date in the rehabilitation agreement.

  1. No More Wage Garnishments

When you begin your consolidation or loan rehabilitation, you can stop the wage garnishment before it even begins. When it starts, you can suspend the wage garnishment after five rehabilitation payments.

  1. Your Credit Score Improves

Your default status is cleared from your federal student loan with the rehabilitation. But the default remains with the consolidation. A new tradeline appears, and the default loan is closed. Late payments will be part of your credit history in both consolidation and rehabilitation.

6. Eligibility For Forgiveness And IDR

You can begin repayment of loans under the income-driven repayment plan when you come out of default. It will make you eligible for forgiveness programs like Public Service Loan Forgiveness, Teacher Loan Forgiveness, and income-driven forgiveness.

Apply for Student Loan Forgiveness Help

If you struggle with university student loan forgiveness, then you should get help with that. Because the employees in these agencies are dealing with the student loans every day and they have enough experience for solving different kinds of student loan problems.

How To Stay Out of Default

When it comes to student loan default help, the best option when you go out of a default is to avoid a default again. Here are some tips on how to prevent student loan default:

  1. Enroll In An Income-Driven Repayment Plan

When you come out of a default, your aim should be to enroll in an income-driven repayment plan, whether you consolidated your loan or rehabilitated them into a Direct Loan Consolidation. The IDR plans permit you to make monthly payments based on your adjusted loan balance, gross income, and family size.

  1. Set Up Automatic Payments

Enrolling in an autopay can help you prevent delayed payments. The best way to avoid a default again is to autopay to ensure that you are always on time with your payments.

  1. Keep Track Of Your Loans

Take a look at your loans to be sure everything is going as planned. Do this preferably every few months.

  1. Keep Records Of Everything

No one truly cares about your loan more than you. Not even your loan servicer. Keeping records will save you from trouble in the future.

Understanding Student Loan Default Rate

Federal student loan default help is crucial when it comes to student loan default rates. Without knowledge of how the student loan default rate works, you can be stuck in huge debt for years.

The student loan default rate can refer to a higher interest rate that is levied on you if you have missed consecutive loan payments. When that happens, a default record is kept on your credit report for six years, even if you pay the full amount. Creditors use the student loan default rate to measure their risk. Economists also use the student loan default rate to check the health of the economy.

Student Loan Default Rate Process

Creditors are not concerned when you miss your payments, at least, not until you miss the second one. When you lose two loan payments, which adds up to 60 days of late payments, your account is considered delinquent. When that happens, the lender reports you to the credit reporting agencies.

The agencies then record your delinquent payment as a black mark on your credit rating. Not good. The creditor may increase your interest rate as a penalty for not paying on time. If the late payments continue, the creditors will keep adding to the previous delinquencies until you pay off your loan.

Beware Of Student Loan Default Help Scams

Many people get calls in which they’re promised student loan default help. Most often, these people make the situation worse. According to the Federal Trade Commission, students have lost over $95 million due to scammers claiming federal student loan default help. So it’s good we talk about these scammers.

There are many companies out there claiming to offer student loan default help. But in reality, they want to make money off you. You should never accept to pay for student loan default help. There are credible companies that help free of charge.

Let’s dive in more.

The scam involves a company which offers students help. The company informs you that you can get the best student loan default rate and loan terms. But before you get the interest rate, you have to pay a fee which they claim to be “small” for their services. The price can be from one to five percent of the student loan amount. Sometimes, you can pay $1,000 upfront.

When you meet these scam companies, you should not, in any way, do business with them. When there’s a lot of debt involved, it’s easy to fall prey to companies “offering” student loan help. We truly understand. However, if you fall victim to the people who claim to offer student loan default help, you could lose a lot more money, and land you in a whole lot of trouble.

Never offer to share your federal student ID with anyone, except to an official government employee or your loan servicer. Be careful of anyone promising you immediate cancellation of your loan debt. The student loan default help is not an instant process.

Identifying Scammers

How to identify scammers who offer you student loan default help:

  1. No legit company will promise you a fast student loan default help. Only scammers can do that.
  2. Never pay a fee upfront. Never.
  3. Scammers can fake any government seal.
  4. Do not share your FSA with any company that claims they can offer student loan default help. Verify from official government websites.

If you suspect that a student loan default help company has duped you, call your loan servicer and inform them. Also, you might want to change your password and username immediately.

Is There Any Student Loan Default Help Company You Can Rely on To Help You?

Yes. Even though there are a lot of scammy companies out there, you can still get trusted companies that offer student loan default help to aid you in getting out of default. So which company can you trust?

Firstly, call your loan servicer. It might sound counter-intuitive, but you can resolve most of these issues if you call your loan servicer. This free option can help you get the student loan default help you need.

If you’re still not sure, consider Forget Student Debt. You can call them on this line for a free consultation: +1866 218 0754