What happens when you defaulted on your student loans, and you don't know what to do that happens to be a lot of borrowers all across America, and the first thing I want you to know is: if that has happened to you don't stress, this is not a Life altering destroying kind of thing that can happen to somebody, because it is something that can be recovered from it's a fairly straightforward process to to not have this destroy your financial future.
But here's what to expect when you have defaulted on your student loans. First, off the weight alone gets into default. Is it goes first into delinquency? What that means is, after 90 days of a late payment, a servicer is going to report to a credit agency that you have made a late payment on your student loans.
That'S a delinquent student loan status. They'Ll certainly reach out to you to try to get that corrected to try to get you to make that payment on that loan, but that is the first step on the road to default. It'S about three months now, if you look at the period of default, that's about 270 days.
So, if you're looking at that amount of time, it's roughly nine months right and after 270 days of non-payment, your loan is declared in default and it basically gets turned over to groups that try to remedy this, and these groups are not that effective. Not that helpful.
Even compared to one servicers in a lot of cases, they're not particularly good in my experience - and these are the options for federal loans that you're going to be looking at for federal loans. You definitely don't want a default because they can garnish your wages. They can garnish your tax refunds, they can even garnish your social security, so you're not going to get out of it by defaulting on your federal student loans.
Furthermore, the garnishment is usually at about fifteen percent of your income and page one and revised pay-as-you-earn are two options that are available to most borrowers. Those payment plans allow you to pay ten percent of your income, so if you're truly broke and you're in default, then one of the worst things you can do is actually default, because the IRS can just take the money, not the IRS, rather the department education.
But that's what people think up right so anywho! What happens is that's what happens when you go in to wage garnishment? They take any refund that you're expecting on your taxes that you getting they're gon na. Seize that it's just really an unpleasant process. Now, the way out of that is through rehabilitation or consolidation, so rehabilitation is a nine-month process of you.
Making agreed-upon monthly payments on your lungs, often they'll, be kind of driven by your income or there'll, be some sort of set amount and you'll pay that for nine months and the benefit of a rehabilitation is the loans can kind of go back to the way they Were in the sense that that credit report kind of gets expunged of that negative event, that happened so, in other words, all that negative stuff that happened on your loans comes off your credit report and you're free from that, impacting you financially now.
That is a very difficult process, usually when people are in default there's different reasons. Some people are truly struggling. Other people are just just blown away from the complexity of our student loan system and they're so stressed out, and they just don't want to think about it. No matter what they just try to not have it enter their mind because it just gives them extreme anxiety every time they think about their loans.
And if that's you, then rehabilitation might not be something that you're gon na be able to do. Well, you might have to do instead is something called consolidation, so you might have to consolidate that loan from a defaulted status to a new consolidation loan.
The benefit of that is it's going to give you an additional three years worth of forbearance, which does not count towards default, and that also is going to allow you to sign up for income driven repayment programs, and it will not take that default off. Of your record, but it will make it a lot easier to make payments, because you'll have one big loan at one place, instead of a whole bunch of loans, a lot of different places and it's going to make the process of signing up for income-driven repayment. A lot easier as well your year, so if you're in default get help, here's also a free phone number to call at the Department of Education.
That number to call is eight hundred sixty one three one, one five that number, if you call it, is a group of feed people at the Department of Education that are dedicated to helping defaulted student loan borrowers. I would definitely give them a call and ask for an explanation of rehabilitating your loans if you can, or if you cannot do that, that's just too stressful, for you just ask them for help.
Consolidating your loans and default do not default in your student loans at least: do not keep them in default long-term. The government's eventually going to get their money and for private student loans. That is a little bit more complicated.
That is something that usually a court is going to sue you and get a basically a judgment or a you know, decision against you for having to pay back some of that money. You really cannot get out of private student loans that easily. There are, however, some attorneys out there that do exist that you know are able to help people get get negotiated. Deals with these private loan companies, but know that usually those settlements are ninety cents. On the dollar, it's pretty uncommon.
To have your defaulted private student loan completely wiped away unless you're in extreme financial circumstances, so federal loans are the worst to default on private loans are still bad to default on. But if you do, you probably have a little bit more recourse that you would need to consult with an attorney. So thanks so much for reading I'm Travis with student loan planner
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