How to Renegotiate Defaulted Student Loans That Are Garnishing Wages

If you have defaulted on a student loan and your wages are being garnished, you can take steps to try to renegotiate the terms of the loan with your lender. Although each situation is unique and might result in a different outcome, it's always a good idea to contact the lender to see what your options are.

Instructions

1. Contact the lender, and explain the situation that led you to default on the loan. Let them know that you want to turn things around and work with them to repay the loan.

2. Discuss an initial payment arrangement. Instead of asking if you can send the lender a lump sum, request that the payments be made over a number of months to establish a new positive payment history.

3. Negotiate with the lender to arrive at a mutually beneficial agreement. This might include regular, graduating or extended payments or income-contingent payments.

4. Stay on top of your newly established monthly payments and respond promptly to any correspondence from the lender.

Tips & Warnings

• You will have to make nine voluntary, consecutive and on-time monthly payments to be eligible for additional Title IV financial aid.

• Outstanding interest and collection costs incurred because of the default probably will be added to your loan balance.

References

• FSA Help Rehab
• FSA Help Loan Default
• Financial Aid Loan Default