Resolving Defaulted Student Loans

- Loans enter default status when no payment has been made for 270 days and the lender determines that additional payments will not be made. Loan default status can cause: possible wage garnishment (10% of income), seizure of tax returns, added interest and fees increasing account balance.

- Avoid default status by requesting a forbearance or deferment if you are unable to make a payment.

- Medical disability or economic hardship including unemployment may meet qualifications for a deferment. Temporary setbacks such as unexpected bills or increase in living expenses can be resolved through forbearance. Every lender has a process to determine eligibility for deferments and forbearances so contact the lender to apply.

Getting Loans Out of Default:

Borrowers can request an Income Contingent Payment plan so that the lender will determine a reasonable monthly payment according to the borrower's income and expenses. This payment arrangement is set up by:

Consolidation - which will combine all federal student loans into one payment through the Federal Direct Consolidation Program. The application is usually completed within 60 days. This is only possible if the borrower has not consolidated student loans before.

Rehabilitation - involves the current holder of the loan and typically requires a minimum of 6 consecutive payments until the loan is taken out of default status.

Loans MUST be out of default status before new student loans can be received and before VESID can assist with education costs.

Federal Direct Loan Consolidation Program : (800) 557 - 7392

If the lender/holder of the loan is not known, contact:

Loan ID Service (877) 264 - 9964 Fax (Include name, SSN#, DOB, and signature in request)

-OR-

Federal Student Aid Information Center (800) 433 - 3243

The Client Assistance Program can work with consumers who are applying for VESID or CBVH services and need to resolve defaulted student loans. For more information, contact the WNY CAP Office @ (716) 836 - 0822 ext. 114

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