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Government Student Loan Rehabilitation
5 Common Roadblocks and Solutions when Dealing with repayment under the Student Loan Rehabilitation Program
5 COMMON ROADBLOCKS WHEN DEALING WITH
STUDENT LOAN REHABILITATION
1. When setting up a payment plan with your agency/lender, they might require you to put down a one time lump sum payment prior to your 9 monthly payments. According to the FFEL, there is no mandatory lump sum payment necessary as a perquisite to the 9 monthly payments. If this occurs, the lender could be in violation of this statute and/or the Fair Debt Collections Practices Act.
2. Another roadblock one might experience while setting up the payment plan is the amount of monthly payments. The agency/lender might argue that they have a minimum monthly requirement. Under the FFEL, there is no mandatory minimum monthly requirement. Only a payment that is reasonable and affordable. If this occurs, the lender could be in violation of this statute and/or the Fair Debt Collections Practices Act.
3. The agency/lender can determine a reasonable and affordable payment by asking you (the borrower) to show monthly expenses, e.g., utility bills, child care bills, rent or mortgage payments, medical costs. If this process does not occur in order to establish a “reasonable and affordable” payment, the lender could be in violation of this statute and/or the Fair Debt Collections Practices Act.
4. After the 9 payments over the 10 month period have been made, the agency/lender is required to sell your loan to another lender, thus getting your loan out of default and back on track. Just recently, the agency/lender was only required to “attempt” to sell your loan. If they were unable to sell the loan to another buyer (which occurred frequently) your loan would sit in default and could still be collected on by a debt collection agency, and re-sold if already at that status. However, a new bill was just passed in June of 2009 and is now awaiting Obama’s signature that requires the DOE (Department of Education) to purchase the loan if no other lender can be acquired. If this does not occur, the lender could be in violation of this statute and/or the Fair Debt Collection Practices Act.
5. Again, after the 9 payments over the 10 month period and once the debt is sold to another lender or the DOE, the default notation on your credit report should be erased. You essentially will be granted one fresh start and as long as you continue to pay on time with your new lender, you will have a satisfactory account now established on your credit report. This is why it is very important to check your credit report about 6 months after this rehabilitation is completed to make sure the correct notations have occurred. If not, there may be violations under the FDCPA and/or the FCRA (Fair Credit Reporting Act).
