How do we help?
TDS Credit Solutions has a team of professionals that will walk you through the process and how to get your loans out of Default, stop and prevent garnish of your wages and income tax, place your loans back into good standings, also disregard any negative and derogatory reading that has been reported on your credit report in regards to your federal student loan, also we will ensure that your student loans are placed into a Income Driven Repayment Plan where you can be on a lower and affordable monthly plan for the duration of your loans.
How Student Loan Rehabilitation Works
The amount you pay each month will depend on your discretionary income. Your loan servicer will usually calculate monthly payments based on 15 percent of your annual discretionary income and break this amount into 12 payments for the year. Discretionary income is determined by subtracting 150 percent of your state’s poverty level, which is based on your household’s size, from your household’s adjusted gross income (AGI).
If you have student loans that qualify, your next step is to sign a new written agreement with your lender. In most cases, this will involve making nine voluntary on-time payments within 20 days of the scheduled due date each month. All nine payments will need to take place consecutively within a 10-month period.
How to Qualify for Student Loan Rehabilitation
One of the best options for getting out of default is through student loan rehabilitation. To qualify for rehabilitation, you must have defaulted loans that fall under the William D. Ford Federal Direct Loan (Direct Loan) or Federal Family Education Loan (FFEL) Programs or is a defaulted Perkins Loan.
If you are rehabilitating a FFEL loan, the guarantor must attempt to find a lender to purchase the loan after you have made the required payments or if no seller can be found, assign the loan to the government. There is no resale requirement for Direct Loans. Once rehabilitation is complete, the loan is removed from default status and you are eligible for new loans and grants. The default notation should be removed from your credit record. In most cases, however, the other negative history will remain until it gets too old to report.
You can regain eligibility for federal assistance before you complete the rehabilitation as long as you make six monthly reasonable and affordable payments. However, you will need to complete the rehabilitation to get out of default.
Student loan default occurs when you’ve missed monthly payments on your student loans for more than nine months (270 days). Once your student loans are in default, recovering these loans can be difficult, but there are a few ways you can get out of default for good.
Lenders will generally add collection costs to the new loan balance, but as of July 1, 2014, this should be no more than 16% of the unpaid principal and accrued interest at the time of the sale of the loan. The Department of Education says that it does not charge these fees to borrowers rehabilitating Direct Loans, but they can change this policy at their discretion. It is a good idea to ask about whether the government is going to add collection fees to your balance after rehabilitation.
Benefits of Student Loan Rehabilitation
During the nine-month period when you’re making payments on your rehabilitated student loan, any wage garnishments or Treasury offsets may continue until the period has ended. None of these involuntary payments will go towards your rehabilitation agreement. However, once the nine-month period is complete, your student loans will be considered out of default, and any wage garnishment or offsets will stop immediately.
With your student loan out of default, you will reestablish your eligibility for other types of loans and programs, including:
- Student Loan Consolidation
- Student Loan Forgiveness
- Other Student Loan Repayment plans
Your rehabilitated loans will also open opportunities to secure new student loans in the future. It also means that phone calls from collectors will stop and your credit history will have the defaulted status of the loan removed.
Please note, however, that student loan rehabilitation is only available one time. This means that if you default on your new rehabilitation agreement, you won’t be able to repair it a second time.