Do You Have a Defaulted Loan?
If you have a student loan and your payments are 270 days or more past due,
you are in default.
A defaulted loan means:
- The full balance of your loan becomes due.
- A collection cost of 24.34% of your balance is added to your loan.
- The worst possible credit rating is reported to consumer reporting agencies.
- You may be denied credit for a cell phone, a home, a car, etc.
- All student financial aid is stopped.
- Eligibility for deferment and forbearance is lost.
- Your account may be assigned to a collection agency.
- Your state and federal tax refund may be seized each year and applied to your loan.
- Your wages may be garnished.
- The loan is usually not dischargeable through bankruptcy.
If you are not able to pay your defaulted loan balance in full, you may
be eligible for rehabilitation by making nine consecutive, voluntary, full,
on-time monthly payments. These monthly payments must continue until you receive
written notification that a lender has repurchased the defaulted loan.
The benefits of successfully completing a rehabilitation program include:
- Your loan will be out of default.
- Your eligibility for financial aid will be restored.
- You may regain eligibility for deferment and/or forbearance.
- The negative credit rating, as reported by KHEAA, will be removed.