Student Loans FAQs

How do I know if I have federal or private student loans?

If you have borrowed loans from the Us Department of Education, your information, as the borrower, will appear in the national database run by the Department of Education, the NSLDS National Student Loan Database Site.

This is a site run by the Department of Education, and with very few exceptions, if you have federal student loans, they will appear in this website when you have created a user name and password. It is very important that when you create the user name and password, to input your correct social security number, last name you had when you borrowed the funds, as well as your correct birthdate. Please note, that the Department of Ed only will have the information for the actual borrower, so the information that you are inputting will only show the loans for the borrower, not their parent, etc.

How can I get out of default on my federal student loans?

The Higher Education Act of 1965 is the federal statute that dictates what can and can not be done with federal student loans. If your federal loans are in default, you can get them out of default through rehabilitation which is 9 payments over a 10 month period. This payment will look like an income driven payment plan which means that it will be 10-15% of your disposable earnings each month. Remember, you are not considered rehabilitated until you receive a letter from the debt collector or US Dept of Education stating that your loans are rehabilitated. Once they are rehabilitated, then the default comes off of your credit report, and your loans will be sent to a servicer.

You may also be able to get out of default by consolidating your federal loans into one loan. This does not mean refinancing them with a private lender, and in most cases we do not recommend that you ever refinance your federal loans into a private loan because the federal statute provides borrowers with many very flexible payment plans and public sector loan forgiveness for those who qualify.

What if the debt collector is telling me that I cannot rehabilitate my loans?

According to the statute you may only complete rehabilitation once, but if you never completed a rehabilitation, you are allowed to attempt rehabilitation as many times as you want.

Do I need to hire an attorney to get out of default on my federal student loans?

As with anything in life, you do not need to hire an attorney. You can apply for and rehabilitate loans yourself, you can consolidate your loans yourself, etc. You can hire an attorney to provide you with expert analysis of your loans and to assist or handle the paperwork necessary in either rehabilitation or consolidation, as well as to provide you with protection from your creditors or debt collectors.

What will happen if I default on my federal student loans?

The Us department of Education will likely hire a debt collector to collect the debt, and will add 25% of the principal plus interest to the balance of your loan as collection fees and costs. The good news is that once you are out of default, those collection fees and costs disappear, except for what has already been paid to the debt collector. If you are employed, there will be an administrative wage garnishment of your paycheck. The US Department of Education can also offset Social Security checks.

What will happen to my co-signor if I default on my federal student loans?

In most cases, if you have federal loans, there is no co-signor, with very few exceptions, such as graduate plus loans. In most cases, if you have a co-signor, then the loan is likely a private loan.

What if I can not afford the payments on my federal student loans?

As long as you are not in default on your federal student loans, you are likely eligible for income driven payment plans which range from 10% of your gross disposable earnings, to 20% of gross disposable earnings if you have federal parent plus loans. This means that if you are unemployed and have no income you are eligible for a zero dollar monthly payment.

Do Parent Plus loans have a co-signor.

In most cases, federal parent plus loans do not have a co-signor. There are private "parent plus" loans however, which many times do have a co-signor. The key is to know what kind of loan or loans you have.

What can I do to lower the payments on my private student loans?

This will really depend upon the contract that you signed for your private student loans. Many times, the borrower can refinance the private loans and obtain a lower interest rate. A Chapter 13 may be a good option to deal with your private loans if the creditor is suing you or garnishing your wages. In addition, about 40% of all private student loans are actually dischargeable under the US bankruptcy Code, meaning that you may never have to repay them if you get a discharge in bankruptcy. You should have an experienced bankruptcy attorney analyze your loans to determine if this is an option. Another option may be to negotiate a reduced balance settlement of the private loans.

Am I eligible for public sector loan forgiveness?

If you have Federal Direct Loans, are in either a standard or income driven plan and are employed in the public sector, you will be eligible for public sector loan forgiveness after 120 on time payments. Late payments and forbearance months do not count towards public sector loan forgiveness.

Is there private sector loan forgiveness?

The balance of your loans will be forgiven after 20-25 years as long as you are on the right payment plan for your federal loans and not in default.