Student Loan Rehabilitation in New York
What is Student Loan Rehabilitation?
Student loan rehabilitation is an attractive option for those individuals seeking to repair their credit report. This is because loan rehabilitation restores your student loans to their pre-default state and can erase any negative information listed with the three major credit bureaus. This of course will likely raise your credit score, making you a better candidate for obtaining future credit. While student loan rehabilitation is an extremely attractive option for those in default, it is only available once and thus a person must be financially prepared to meet the various conditions.
Learn more about how we can help you by contacting us online or calling (888) 801-7765 today to speak with a student loan rehabilitation lawyer near you!
How Does Student Loan Rehabilitation Work?
In order to rehabilitation a student loan, the debtor enters into an agreement with the loan holder that defines monthly payment amounts and due dates for a 9-month qualification period. This rehabilitation agreement will set reasonable/affordable monthly payments, often times just 1% of your outstanding balance. Though it is possible to qualify for lower monthly payments, the debtor must demonstrate financial hardship and this may indicate that rehabilitation is too risky a proposition (as it is only available once).
Once the rehabilitation agreement is entered into, the debtor is obligated to make all 9 monthly payments on time (i.e. within 20 days of the due date) and cannot make early/extra payments to attempt to speed up the process. If the debtor fails to fulfill the terms of their rehabilitation agreement, their loans will stay in default.
The rehabilitation process is finalized once a new lender purchases the loan. Although there is no set timeframe for when this will occur, it opens the door to having all negative information regarding those loans removed from the debtor’s credit reports. In addition, all loan information is updated on the National Student Loan Data System website. When this occurs, it makes the debtor once again eligible for deferments, forebearances and Title IV financial aid.
What Types Of Loans Qualify For Rehabilitation?
Unfortunately, only federal student loans qualify for loan rehabilitation. The various types of student loans include:
- Federal Stafford loans (formerly GSL)
- Federal Perkins loans (formerly NDSL)
- Federal PLUS (Parent Loans for Undergraduate Students)
- Federal Grad PLUS (PLUS loans for graduate and professional students)
- Federal Consolidation loans
- Federal SLS (formerly ALAS)
- Health Professions Student Loans (HPSL), and
- Nursing Student Loan (NSL)
What Are The Benefits Of Student Loan Rehabilitation?
There are many benefits associated with the rehabilitation of defaulted student loans, including:
- The termination of all collections activity and legal proceedings,
- The prevention of wage garnishment and seizure of state and/or federal tax refunds,
- The restoration of those student loans to “current” status,
- The restoration of eligibility for deferment, forbearance and alternative repayment plans,
- The restoration of eligibility to apply for additional loans, and
- The potential repair/erasure of negative credit reporting.
Why Do You Need a NY Student Loan Rehabilitation Attorney?
The student loan rehabilitation process may seem straightforward, but it’s not always easy to navigate. Without proper legal guidance, you may encounter roadblocks, delays, or complications. A skilled student loan rehabilitation attorney from Graham & Borgese can provide the following benefits:
- Guidance Through the Process: The rehabilitation process can be complicated, especially if your loans are with multiple servicers. We will guide you step by step to ensure you understand your options and make the right decisions.
- Negotiating with Lenders: Loan servicers may not always offer the best deal to borrowers who are struggling. With legal representation, we can negotiate on your behalf to secure better terms, including more affordable monthly payments.
- Ensuring Full Compliance: To complete the rehabilitation program successfully, you must meet specific requirements, including making a set number of monthly payments on time. We help ensure that you stay on track and meet all deadlines.
- Credit Repair and Restoration: One of the most significant benefits of student loan rehabilitation is the ability to repair your credit. Defaulted loans can severely damage your credit score, but once your loans are rehabilitated, the default status is removed from your credit report. We work with you to improve your credit standing during and after rehabilitation, helping you get back on the path to financial health.
Student Loan Consolidation vs. Rehabilitation: Which Option is Best for You?
When facing student loan default, two primary options for getting back on track are loan rehabilitation and loan consolidation. Understanding the differences between these two options is essential to making the right decision for your financial future. Here’s a comparison of both:
Student Loan Rehabilitation
Rehabilitation involves a process where you make nine consecutive, on-time monthly payments to restore your loan to good standing. After completing the rehabilitation program, the default status is removed from your credit report.
- Impact on Credit: Once you complete the rehabilitation process, the default will be removed from your credit report, improving your credit score significantly.
- Payment Terms: Your monthly payments are typically based on your income, making it a more affordable solution for many borrowers. You’ll have to adhere to a set repayment schedule for the nine months.
Pros:
- Removes the default status from your credit report.
- Offers lower, income-driven monthly payments.
- Helps restore access to federal student loan benefits like eligibility for income-driven repayment and Public Service Loan Forgiveness (PSLF).
Cons:
- Requires making nine consecutive, on-time payments.
- Not available for loans that are not in default.
Student Loan Consolidation
Loan consolidation combines all of your eligible federal student loans into a single loan with a fixed interest rate. This simplifies the repayment process and may extend the repayment term.
- Impact on Credit: Consolidation doesn’t remove the default status from your credit report. In fact, consolidating a defaulted loan may result in the default status remaining on your credit, potentially affecting your score.
- Payment Terms: The interest rate on a consolidated loan is the weighted average of the interest rates of your current loans, rounded up to the nearest one-eighth percent. You may also extend the term of your loan, which could reduce your monthly payments.
Pros:
- Simplifies the repayment process by combining multiple loans into one.
- Extends the loan term, reducing monthly payments.
- Helps borrowers who have defaulted to re-enter repayment.
Cons:
- Does not remove the default status from your credit report.
- Interest rate may be higher than the original rate.
- May not offer the same level of borrower benefits as rehabilitation.
Ultimately, student loan rehabilitation is often the better option if your goal is to restore your credit and eliminate the negative impact of default. However, loan consolidation may be suitable if you're looking for simplified payments or need to manage multiple loans. It’s essential to consult with an experienced attorney to help you determine which path is best for your financial future.
Credit Repair in New York
Student loan default can have a devastating impact on your credit score, but rehabilitation is just one of many strategies for repairing your credit. At Graham & Borgese, we can help you rebuild your credit by providing a comprehensive approach to credit repair in New York. Here’s how we can help:
- Credit Report Review: We’ll start by reviewing your credit report to identify any inaccuracies or outdated information. This helps us understand the full scope of your credit situation and develop a plan to improve your score.
- Disputing Inaccurate Information: If we find any errors on your credit report—such as accounts listed as defaulted when they should be rehabilitated—we’ll work with the credit bureaus to dispute those inaccuracies and have them removed.
- Debt Negotiation: We can negotiate with creditors to lower your debt or settle outstanding balances, which can help reduce the negative impact on your credit score.
- Strategic Debt Management: Beyond student loans, we can help you manage other forms of debt, ensuring that you’re making consistent, on-time payments to improve your credit over time.
Contact Our NY Student Loan Debt Rehabilitation Lawyer
If you're struggling with student loan debt or seeking credit repair in New York, don’t wait to take action. Let Graham & Borgese help you navigate the student loan rehabilitation process and rebuild your credit.
At Graham & Borgese, we understand that student loan debt can be a heavy burden. Our team is dedicated to offering personalized, compassionate legal counsel to help you navigate your student loan rehabilitation and restore your credit. Contact us today for a free consultation and take the first step toward financial stability.
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Contact Graham & Borgese online or by calling (888) 801-7765 today for a lawyer near you!