How to Negotiate a Defaulted Federal Loan in Illinois
Student loans can represent a severe financial burden, particularly if you have difficulty finding a job after you leave school. However, inability to secure a lucrative job does not prevent you from having to repay your student loans. If you fall 180 days or more behind on your loans, your lender will likely consider your loan in default and may take aggressive action to recover your unpaid student loan debt, including garnishment of your wages. If you are an Illinois resident and your student loans are in default, you may still have options available to negotiate repayment.
Other People Are Reading
Instructions
-
-
1
Contact your lender as soon as possible. Even if your loans are in default, your lender may work with you to help you catch up your student loan debt. Communicating with your lender shows that you are willing to repay your debts and may allow you to take advantage of options that the lender might not offer to borrowers who continue to ignore their debts.
-
2
Ask your lender about student loan rehabilitation. This option typically involves making nine on-time monthly payments in amounts determined by your lender. After you have completed the trial repayment period, your loans may be eligible for purchase by another servicer and might no longer be considered in default.
-
-
3
Inquire about loan consolidation with your lender. Consolidating your loans can help you bring your student loan accounts current and allow you to make a single monthly payment, instead of making several payments to different lenders each month. You will typically have to provide detailed financial information and allow the lender to obtain reports from the Internal Revenue Service to qualify for a student loan consolidation after default.
-
4
Ask your lender about a student loan settlement if you have a lump sum available to pay your lender. You typically cannot settle a federal student loan for less than 70 percent of the principal balance and interest; however, this strategy may help you avoid paying additional interest and late fees on your defaulted loans.
-
1
Tips & Warnings
Calculate the lender's collection costs along with principal and interest if you decide to rehabilitate your loans. Your lender may charge up to 18.5 percent of your loan balance after you complete the trial repayment period.
Avoid defaulting on your loans if you obtain a consolidation loan. You will not be eligible for another consolidation unless you add a new loan. Also, you can only rehabilitate each student loan once unless your first rehabilitation was before August 14, 2008.
