Student loan bills can be pricey.  However, failing to make your monthly payments could eventually put your student loans in collections.  This guide explores what it means to be in student loan collections – with solutions to get out, for good. 

How Borrowers End up in Student Loan Collections

If you did not apply for a forbearance or deferment – and haven’t made a student loan payment for 270 to 360 days – your loans will end up in default.

Once in default, your lender may decide to sell your debt to a collection agency. If this happens, the collection agency’s add on fees to your original debt balance – which could mean MORE debt! 

Generally, agencies charge anywhere between 18% – 40% of your debt balance. Thus, a student loan balance of $25,000 would be $30,000 after a 20% collection fee increase.

How to Get Out of Student Loan Collections

Step one out of student loan collections is to get your loans out of default. This can be accomplished through the DOE’s Rehabilitating Program.  If you’re behind on your payments but aren’t currently in default,  you may still qualify for a consolidation.  Below is a summary of both options. 

  • Student Loan Rehabilitation Program – The Department of Education may agree to rehabilitate your loans once you’ve made on-time payments for a set number of months. How much you’re expected to pay each month depends on the new agreement between you and the DOE.  If you successfully complete the rehabilitation program, your loans will be removed from default status and taken out of collections.  Once this is done, you become eligible for a consolidation.
  • Student Loan Consolidation – If you’re late on payments, but not yet in default or in student loan collections, a consolidation is still an option. A Direct Consolidation Loan can help you move your loans into a more affordable repayment plan before you default.  With a Direct Consolidation Loan, you may have the option to enroll in an Income-Driven Plan which could help you lower your monthly payments if you qualify. 

Stay Out of Collections For Good

Just because you’ve made it out of student loan collections this time, doesn’t mean it can’t happen again. However, if you stay enrolled in a repayment plan you can actually afford, you’re eliminating the risks of entering student loan collections in the future.

If you need help choosing a repayment plan now – or once your loans are successfully rehabilitated, Docupop is happy to help you find the best repayment plan to fit your budget and needs.

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