Repairing a defaulted federal student loan

Oops, you haven’t made your federal Stafford, PLUS or Graduate PLUS loan payment in 270 days and your loan has defaulted. How to you get out of this one?

Having a defaulted Stafford, PLUS or Graduate PLUS loan on your credit report will cost you dearly in the long run. The bad mark will mean higher interest rates and credit denials until it is cleared, a minimum of 7 years. Even if you pay the loan in full it will still be marked as defaulted. There is only one way out of this predicament – loan rehabilitation.

It’s easier than you think! By contacting your lender and making arrangements for repayment you are on your way to a clean credit report. Your lender wants to get paid, and they know the best way for that to happen is to work with you to come up with a payment you can afford. When you reach a satisfactory repayment agreement with your lender stick to it! After 9 full payments on your defaulted Stafford, PLUS or Graduate PLUS loan made within 20 days of their due dates (12 for Perkins loans) your loan will be taken out of default status. These must be voluntary payments, garnishment or other forced payments do not count. As soon as your default status is cleared you will be free to consolidate your loans and lower your payments even more. Contact us at www.feded.net for further assistance.

Note: You may be able to consolidate after 3 consecutive payments but your loan will not be taken out of default status. It will be marked on your credit report “defaulted, paid in full” and still considered a black mark so loan rehabilitation before consolidation is mandatory for a clean credit history.

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