How to Deal With Defaulted Student Loans

 

Having a defaulted student loan on your credit report can plunge your credit score to distressful lows, dragging you down along with it. You may feel that you have reached rock bottom and will be there for a long, long time. You are not alone; misery does love company.

 

But there is hope. You can gain back the privileges you have lost and may even have the defaulted student loan entry on your credit report removed.

 

Here is some helpful advice that you should consider seriously:

 

1. Verify accuracy of the defaulted student loan. You may be surprised to find out that several entries leading to the default are not accurate. Student loans usually get transferred from one lender to another due to refinancing. If you find any discrepancies or transactions that were not legal, you can challenge the entries and have your loan reinstated.

 

2. Rehabilitating your student loan can have it reinstated and the negative entry pertaining to your defaulted student loan taken off your credit report. To do this you must be able to make 9-12 consecutive monthly payments.

 

3. The pay-off option is another sure way to get your credit report cleaned. It may not be the best option considering your situation, though.

 

4. You may avail yourself of the Direct Loan Consolidation. It offers students a means to repay their defaulted student loans with low and controlled interest and up to 25 years of repayment schedule. Once you have availed of this loan consolidation option you may opt for deferment or forbearance.

 

The drawback to this type of consolidation is that the amount of the loan is increased to include the unpaid interest, and after interest is charged on the accrued interest, the loan balance can increase significantly.

 

5. You may also take advantage of Federal Family Education Loan Consolidation. It gives borrowers a consolidated loan with various repayment schedules. With this option, a commercial lending company will make the consolidated loan. Credit bureaus will then be notified that your account has a zero balance, which would reflect on your credit report. You must make 3 consecutive monthly payments on your defaulted student loan to qualify for this type of consolidation.

 

6. Declaring bankruptcy may not be a good option, but it is an option. Declaring bankruptcy cannot discharge defaulted student loans. However, you may do so by proving that repaying the defaulted student loans is not possible. Bankruptcies stay for years in your credit report, which is something that you may not want to happen.

 

7. Get legal help for free. There are several non-profit organizations that offer free legal help on these matters. Getting one would unburden you of several legal decisions that you need to make.