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When is a student loan out of default?


Drake Savory
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My student loan is in default and just got sold off to a debt collector.  I'm writing the DV letter today and it struck me that I have no clue how to get off default status.  Is it:

 

Paying the Dept of Ed and their CA?  If so, can that be done now that it is with a collector.

When the debt cannot longer be collected like if the collector cannot validate?

Now since it is out of the DoEd's hands since the debt is sold off?

Some other method of rehabilitation?

In default forever since it's the governmnet?

 

 

Thanks.

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Hi Drake,

 

I'm a financial aid counselor, as well as someone with a lot of student loan debt :-)

 

Is your loan a Federal Direct or Federal Family Education Loan?  If you don't know, your first step is to go to www.nslds.ed.gov and log in to your account and choose "financial aid review." You will need a 4 digit pin number (the same one you use to sign a FAFSA) so if you don't have one already, you will need to sign up at www.pin.ed.gov.  It takes 3 days for your pin to be active to check out your loan information.  Once inside NSLDS, you will see a list of all federal grants and loans you have received, the balances, and the servicers and guarantors of the loan(s).  Loans can change servicers and there are quite a few servicers out there, so this is an important step.

 

If your federal loan(s) are not consolidated loans, the fastest way to get them out of default is to consolidate them.  This process takes about 2-3 months.  The website to do this is: http://www.loanconsolidation.ed.gov/  (for some reason, the site's down today.  DOE usually updates their sites on Sundays)  Do take the time to read over all the terms and conditions to see if this is the right step for you.  There are some advantages and disadvantages to doing this.  You will be required to pay under the Income Contingent or Income Based Repayment Plan for some time.  Calculators to determine what your payment would be can be found at http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html

 

This doesn't work for private loans, unfortunately.

 

To answer your other questions, you can work with the DOE to resolve your default, even if they sold it.

You can make payments for 12 months and rehab your loan

Yes, it will be in default forever, unless you do something to bring it out of default. 

 

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Be advised, if you do your consolidation while your loans are in default, they cannot be consolidated again.  I have intimate knowledge of loans in default as I assisted my roommate in getting her credit back in line.  If it were me, I would call the collection agency and inform them you'd like to bring the loans out of default and take steps toward rehabilitation.  Once your loans are fully rehab'ed, then look into consolidation.  If you miss a SINGLE payment in rehab, you have to start all over, so don't attempt to go down that road unless you know you can make the payments.

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Yes the rehab program I was on ended when I had to go on unemployment 2 summers in a row.  The loan went to a CA and I am debt validating with them on this but I suspect they will have all of there paperwork lined up. 

 

My question was more of a theoretical one as if the CA can't validate and therefore I don't need to pay THEM, could I use that to get the loan out of default or is it more complicated than that?  Sound like it doesn't matter if the student loan is out at the CA as I still oew the DoEd right?  And they never sell their loans do they?

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