What Happens After Student Loan Rehabilitation?

After successfully completing a Student Loan Rehabilitation, your account will be transferred out of default status. This is an important first step to regaining control of your finances.

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The Process of Student Loan Rehabilitation

After you have completed your student loan rehabilitation, the next steps will be to begin making payments on your loan and to rebuild your credit. The first step is to make sure that you are on a budget and that you can afford your payments. You will also need to start paying on time to rebuild your credit.

You will be contacted by your loan servicer

After you complete the nine monthly payments required for student loan rehabilitation, you will be contacted by your loan servicer to discuss repayment options. At this time, you can choose to begin making payments under a new repayment plan or continue with the Standard Repayment Plan. You may also be eligible for other repayment plans, such as the Graduated Repayment Plan or the Extended Repayment Plan. If you are not able to make payments under any of the repayment plans offered, you may be eligible for student loan consolidation.

You will be asked to submit documentation

After you submit your completed student loan rehabilitation application, the loan holder will contact you to set up a payment plan. You will be asked to submit documentation to verify your income and expenses.

The payment amount will be equal to 15 percent of your discretionary income, which is defined as the difference between your total monthly income and 150 percent of the federal poverty guidelines for your family size. Your payment must also be reasonably affordable, based on your current financial circumstances.

If you agree to the terms of the repayment plan, you will make nine consecutive monthly payments. Once you have made all nine payments, your default status will be removed from your credit report, and you will regain eligibility for federal student aid.

You will be asked to sign a rehabilitation agreement

Your loan servicer will send you a Rehabilitation Agreement, which explains the rehabilitation terms and conditions. The rehabilitation agreement also gives you an opportunity to select a repayment plan for once your rehabilitation is complete.

You will need to sign and return the rehabilitation agreement to your loan servicer before your loan can be reinstated. If you have trouble understanding the terms of the agreement, you can ask your loan servicer for help or contact a housing counselor or lawyer before you sign the agreement.

If you do not sign and return the rehabilitation agreement within 60 days, your guarantee agency may pay a default claim on your loan, and your loan will no longer be eligible for rehabilitation.

You will make 9 monthly payments

If you enter into student loan rehabilitation, you will make 9 monthly payments. Your loan holder will work with you to set up a reasonable monthly payment amount based on your income and financial situation.

You must make all 9 of your monthly payments on time and in full. If you miss a payment, or if you make a late payment, you will automatically default on your rehabilitation agreement and your loan will go back into default status.

Once you have made all 9 of your required monthly payments, your loan holder will report to the credit bureaus that your loan is no longer in default. This will likely result in an increase in your credit score.

After your loan is out of default status, you may be eligible for certain student loan benefits that were not available to you before, such as student loan consolidation or income-driven repayment plans.

The Benefits of Student Loan Rehabilitation

Student loan rehabilitation is a process where you make nine on-time, monthly payments within 20 days of the due date. The payments must be made within 10 months. Once you have completed the rehabilitation process, your default status will be removed from your credit reports. This can help you improve your credit score.

You will re-establish your credit

Your credit report will show the missed payments as well as the successful rehabilitation. The late payments will remain on your credit report for seven years. The rehabilitation, however, will be reported as a positive account, which can help offset the negative information.

Rehabilitation also gives you the ability to apply for new financing. After you successfully complete a rehabilitation program, you can begin rebuilding your credit by making on-time payments on your new loans and other debts.

Your loans will be removed from default status

Under the Student Loan Rehabilitation program, your loans will be removed from default status. This means that you will once again become eligible for federal student aid. In order to rehabilitate your loans, you must make nine voluntary, on-time, full monthly payments within 20 days of the due date during a 10-consecutive-month period.

You will regain eligibility for deferment and forbearance

The goal of student loan rehabilitation is to help you get back on track with your payments and become eligible for certain benefits that you may have lost.

One of the immediate benefits of student loan rehabilitation is that you will regain eligibility for deferment and forbearance. If you have been struggling to make your payments, these programs can give you a much-needed break.

Additionally, once you have completed the rehabilitation program, your loans will no longer be in default. This will allow you to qualify for new federal loans and could help you improve your credit score.

You will regain eligibility for student loan consolidation

The biggest advantage of successfully completing a student loan rehabilitation program is that you will once again become eligible for student loan consolidation.

Loan consolidation can offer a number of advantages, including the ability to lock in a lower interest rate, the chance to extend your repayment term, and the opportunity to switch from a variable interest rate to a fixed interest rate.

In order to consolidate your loans after rehabilitation, you must first make three consecutive monthly payments on time. Once you have done this, you can then apply for consolidation through the Department of Education or through a private lender.

The Disadvantages of Student Loan Rehabilitation

Rehabilitation can be a great way to get your student loans back on track. However, there are a few things you should be aware of before you go through with it. First of all, your monthly payments will likely increase. You will also lose any deferment or forbearance options that you might have had. Finally, your credit score will take a hit.

The rehabilitation process can be time-consuming

The rehabilitation process can be time-consuming, and you will need to make nine monthly payments within 20 days of their due date during this period. You may have difficulty making these payments on time if you are still struggling financially. If you miss a payment or are late, your loan rehabilitation agreement is void, and your loan will return to default status.

You may have to pay more than you would if you consolidated your loans

If you enter student loan rehabilitation, you’ll make smaller monthly payments for up to nine months. After you make your final payment, the default status of your loan will be removed from your credit report, and you’ll be able to apply for new federal student aid.

Rehabilitation has some advantages over consolidation. For example, rehabilitation gives you the opportunity to get rid of the default status on your credit report and rehabilitated loans are not subject to the 60-day waiting period before you can receive additional federal student aid.

However, there are also some disadvantages. Rehabilitation can be more expensive than consolidation because the total amount of your rehabilitated loans may be higher than the amount of your consolidated loans.

Additionally, the rehabilitation process may take longer than consolidation. If you enter rehabilitation, you’ll have to make nine monthly payments before the default status is removed from your credit report. In contrast, if you consolidate your loans, the default status will be removed immediately after you begin making payments on your consolidated loan.

You may not be eligible for student loan forgiveness

One of the main reasons borrowers choose student loan rehabilitation over student loan consolidation is that they believe it will make them eligible for student loan forgiveness. Unfortunately, this is not the case.

Student loan rehabilitation does not make you eligible for any type of student loan forgiveness program. The only way to become eligible for student loan forgiveness is to consolidate your loans into a direct consolidation loan.