f. Getting Out of Default
You can get out of default on any government loan if you make a certain number of payments under a “reasonable and affordable” payment plan and then rehabilitate the loan. This is how it works: You have the right to get on a payment plan that is “reasonable and affordable” based on your financial circumstances. If you make six consecutive timely payments under this plan, you will become eligible for new student loans and grants. Only enter into this payment arrangement if you can truly afford it. If you default, you won’t get another chance to get out of default this way.
If you make twelve consecutive timely payments and jump through a few other hoops, you will be able to “rehabilitate” your loan – this means you’ll no longer be in default.
Once you’re out of default, and if you don’t qualify for a deferment of the loan, you will have to repay the loan within ten years. So, if you’ve been paying very small amounts under the “reasonable and affordable” payment plan, when you get out of default, your monthly payment amount may rise dramatically. If you can’t afford the new amount, you should request one of the flexible repayment options described above.
Taken From : Credit Repair by Attorneys Robin Leonard and Deanne Loonin
