Changes to Default Rehabilitation Procedure will help cause consistency in process

One of our goals here in addition to giving tips on how the student loan process works is to additionally touch on student loan stories in the news and how they affect you the borrower.  Today we will focus on the recent change that will hopefully never affect you: Default Rehabilitation procedure.

The program itself has not changed.  You enter a rehab to attempt to get your loans back into repayment.  Once you make 9 payments for the agreed upon amount you are returned to a servicer.  After this 10 month period, the default (but not the previous negative credit reporting), will be removed from your report.  For more information it would be best to talk to the agency handling your default resolution.

The key change is they are now making it uniform among those handling government loans with an Income-Based Rehab program.  Beginning July 1, 2014 the amount that a borrower pays will now be based on their income similar to an Income-Driven Repayment plan.  Only difference is the minimum is $5.00 instead of $0.00.  Also a borrower will typically be placed on a Direct Debit program to ensure payments are made.

Once a borrower is in Repayment and out of default, they will be placed on a plan that is similar to the amount they were paying in default for 3 months.  After this time period it will switch back to a standard repayment schedule.  However this 3 month window will also give the borrower a chance to review all the repayment schedule options that are available to them.

This change is done in hopes of not only making the process more uniform but additionally help those that had a bump in the road get back to repayment and ultimately paying off their loans as successful repayment is the ultimate goal of the FSA when it comes to borrowers and their loans.