Forum Rules (Everyone Must Read!!!) (updated: 04/28/2015)

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Getting Federal Loans Out of Default

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  • Getting Federal Loans Out of Default

    Well, I've got my BK ready to file as soon as I tell my lawyer to file, just settled the remainder of my private student loan and the only thing I have left is my Federal Student Loans.

    I was originally going to try for an adversary proceeding (life long medical condition and expensive meds for the rest of my life), but seeing as how I no longer have the private loans, I'm thinking I'm going to bring my federal loan current and attempt to get this paid off as quickly and efficiently as possible.

    Does anybody have any advice or been through the process of getting it out of default???? Initially, when I lost my job, I called the servicer and asked them if they could lower my payment. They told me no, I was in principal only as I was about 5 years in on a 10 year loan. They would no longer give me any more forbearance and it defaulted. My industry has been crap and I found myself in the hospital a couple times. Needless to say, I'm three years in default and need to correct the situation.

    When I approach them, is there any possibility they will remove any of the interest or fees they've tacked on? I haven't looked yet, but I can only imagine they've put on enough interest and fees to bring my total past what it was originally.

    I'm wondering if because I am going to call them and be honest, explain that I want to fix the problem etc. and am unemployed (won't be telling them where the money is coming from) if they will work with me in any way so I'm not completely screwed.

    Yes, I realize it's my own doing, I took out the loans, etc. I also realize banks are jerks and I have zero sympathy for them. I really just don't want to turn what was five years left into having to pay for 25.

    Any advice? Thanks!

  • #2
    First you have to get the loans out of default...that is a fairly standard thing, it requires 9 months of timely payments.

    After that, there are only 3 options for Federal Student loans, as far as settlement goes...

    1. Waiver of the collection charges (the borrower pays only the current principal and accrued but unpaid interest).

    2. Payment of the current principal balance plus half of the accrued but unpaid interest.

    3. Payment of at least 90% of the current principal and interest balance.
    Last edited by HHM; 06-15-2012, 03:10 PM.


    • #3
      The collection agency working on behalf of AES kept telling me I was not eligible for rehabilitation. I called AES/ PHEAA and they said I was. I called the collection agency and they said they never told me that. (I believe they were lying to me).

      Long story short, It's a fairly simple process to get out of default. After three years of not paying anything, I was dreading the interest and collection fees. They are no where near the horror stories I've read on the internet. In fact, if anything, it will add a sixth year to the remaining five years I have left on the loan. (The first 9 payments are a fraction of what I used to pay, so I may pay more to get the interest and fees gone quicker).

      I finally feel like I can breathe again.


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