First off, don’t panic. Having a big cloud of debt hanging over your head is stressful! Knowing that you’re falling behind on your payments and then getting that all-caps DEFAULT NOTICE in the mail is even worse.
But, we’re here to tell you that you’re not alone. We’re here to help. So take a deep breath and read on to learn about your options and how WorkMoney can help.
If you have federal student loans
You should be eligible for the new Fresh Start Program. This new program will help restore your credit report, end collections, and allow you to be eligible to enroll in repayment plans and apply for forgiveness.
If you have a defaulted Direct loan, defaulted Federal Family Education Loan (FFEL), or defaulted Perkins loan that is held by the Department of Education, you will be eligible for the Fresh Start program. If you’re not sure what type of loan you have, you can call the Default Resolution Group at 1-800-621-3115.
You can become eligible for Income-Driven Repayment Plans or loan forgiveness programs once your loans are out of default.
If you have private student loans
We encourage you to reach out to our partners at Savi to talk through your options. Savi is a great service that helps student loan borrowers find ways to reduce their loan payments.
To get started with the Savi team, log in to your account and click “Contact an Expert”. If you are in default, you won’t be able to see options for repayment plans or eligibility for forgiveness in the Savi tool, but Savi can help you understand your options for a defaulted loan through programs like the loan rehabilitation process. With Savi’s help, you can contact your servicer to start the loan rehabilitation process.
How does loan rehabilitation work?
The loan rehabilitation program is designed to help borrowers remove their loan from default and have their loan be in good standing. One of the biggest benefits of rehabilitation is that your defaulted loan would no longer appear on your credit report.
To rehabilitate your loan, you’ll work with your loan holder to make nine payments for ten consecutive months. The payment amount will be set by your loan holder, but the amount will be something that is reasonable and affordable. Note, you will only be able to take advantage of the loan rehabilitation program one time.
Once your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset will stop. You’ll regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness, and you’ll be eligible to receive federal student aid. Additionally, you can pick up your progress in the Savi tool and complete your application(s) for loan forgiveness programs or repayment plans.