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Student Loan Default
 
For student loans authorized under Section 435(i)Title IV of the Higher Education Act, default occurs on a FFEL loan after a default has persisted for 270 days in the case of a loan repayable in monthly installments or 330 days in the case of a loan repayable in less frequent installments. The change is effective for loans for which the first date of delinquency occurred on or after October 7, 1998. During the delinquency period, the lender must exercise "due diligence" in attempting to collect the loan; that is, the lender must make repeated efforts to locate and contact you about repayment. If the lender's efforts are unsuccessful, it will usually take steps to place the loan in default and turn the loan over to the guaranty agency in your state. Lenders may "accelerate" a defaulted loan, which means that the entire balance of the loan (principal and interest) becomes due in a single payment.

Once your loan is assigned to a guaranty agency or the U.S. Department of Education for collection, the following steps may be taken to recover the outstanding balance due:

Once a loan is declared in default, you are no longer entitled to any deferments or forbearances. In addition, you may not receive any additional Title IV Federal student aid if you are in default on any Title IV student loan until you have made payments of an approved amount for at least six consecutive months. Please see Going Back to School for more information on this topic.

Defaulted Student Loans

After you graduate, leave school, or drop below half-time enrollment, you have anywhere from six to nine months before you begin repayment. You will receive information about repayment and will be notified by your loan provider of the date loan repayment begins.

Addressing Your Defaulted Student Loan

If you default on your student loan, the maturity date of each promissory note is accelerated making payment in full immediately due, and you are no longer eligible for any type of deferment or forbearance. Continued failure to repay a loan in default may lead to several negative consequences for you over the long-term including having your wages garnished, your Federal income tax withheld, and losing your eligibility for other federal loans like FHA or VA.

However, there are now more ways than ever before to repay your defaulted student loan and certain programs even can even remove your loan from its defaulted status. Determining which repayment option that is right for you depends on what your objective is.

"I want to pay my defaulted student loan in monthly payment that are affordable to me." 

  • All guaranty agencies and the U.S. Department of Education (ED) will accept regular monthly payments that are both reasonable to the agency and affordable to you.  You should call us at 1-800-621-3115 and one of customer service representatives will assist you with determining a repayment amount that is right for you.

"I want to reestablish my eligibility for additional federal financial aid and go back  to school."

"I'm applying for a HUD (FHA) or VA loan and I don't qualify because of my defaulted student loan."

  • Your options for reinstating your eligibility to receive a HUD (FHA) or VA loan are: repay or satisfy the loan in full;  consolidate your loan through the FFEL loan consolidation program or the William D. Ford Direct Loan Program; or rehabilitate your loan through our loan rehabilitation program. Since defaulted student loans have no statute of limitations for enforceability, you would remain ineligible to receive a HUD or VA loan until you complete one of the options mentioned above.

My credit record is tarnished because of my defaulted student loan. Is there anything that I can do to improve my credit record?"

Failure to repay your defaulted student loan can be damaging to your credit record. In fact, consumer reporting agencies may continue to report an account for 7 years from the opening date. However, there are several things that you can do to at least partially, and in some cases, fully restore your credit record. Your options for bettering your credit report include: repay or satisfy the loan in full;  consolidate your loan through the FFEL loan consolidation program or the William D. Ford Direct Loan Program; or rehabilitate your loan through our loan rehabilitation program.

If you want all negative credit reports made by the Department to your credit record, you must successfully complete our loan rehabilitation program.

Can I pay my defaulted student loan held by the Department by credit card?

Absolutely. We accept American Express, Discover, Master Card and Visa as repayment options. To repay a loan by credit card, please call us at 1-800-621-3115.

What address do I send my payments to?

If you have a defaulted student loan held by the Department of Education, you can mail a check or money order to the address below. If you are at all unsure about the status of your loan, or who currently holds your loan, please call us first at 1-800-621-3115 before sending in payment.  You may also use Loan Locator to help you find out what lenders currently hold your loan(s).

National Payment Center
P.O. Box 4169
Greenville, TX 75403-4169

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