Credit SparkFinancial Tips for the Average Joe

Student loan default is becoming more common given the high levels of unemployment and lagging economy.  Unfortunately for those facing default, the government is not one to give up when it comes to collecting their money.  In fact, of all collection efforts out there, those to collect student loans are some of the most aggressive.  Let’s face it, dealing with debt collections is never fun!

Because student loans do not have a statute of limitations and they are not dischargeable in a bankruptcy, they are not something that you can just ignore and hope that they go away.

One option that you may want to consider is entering into the student loan rehabilitation program. You will need to contact your lender and let them know of your interest.  If they offer this program, (Some guarantee agencies no longer do because of the difficulty in selling the loan after it is rehabilitated.) you will be required to make nine on time payments on your loan.  The amount that you pay is negotiable up front, and all payments must be received within 20 days of their due date.  Payments collected through wage garnishment do not count.

After you contact your account holder, you will want to make sure that you get everything in writing.  They will ask you to sign a form agreeing to enter into the rehabilitation program.  Make sure that you understand what your rights and responsibilities are before you commit.

Once you have made nine payments, you loan is considered rehabilitated and the default status is removed.  This means that you are now eligible again to receive student loans and grants.  You can also utilize programs, like income based repayment to make your payments more manageable.

One thing to be aware of is that chances are collection costs equal to 18.5% of your balance will be added to your account in addition to your accrued interest.

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