Consolidating student loan payments

To qualify for FFEL or Direct Loan rehabilitation, you have to make nine monthly payments within 20 days of the due date during a period of 10 consecutive months.The 9 out of 10 rule basically allows you to miss your payment one month, but still be eligible to rehabilitate. To rehabilitate a Perkins loan, you must make nine payments in a nine month period.An interruption in this consecutive period is allowed for qualifying military service members or affected civilians.These borrowers may resume their rehabilitation payments after their service is completed.Lenders will generally add collection costs to the new loan balance, but as of July 1, 2014, this should be no more than 16% of the unpaid principal and accrued interest at the time of the sale of the loan.The Department of Education says that it does not charge these fees to borrowers rehabilitating Direct Loans, but they can change this policy at their discretion.

You can renew eligibility for new loans and grants and eliminate the loan default by “rehabilitating” a defaulted loan.This does not mean that you are eligible for IBR while you are still in default.Instead, the loan holder will use the 15% IBR formula to determine a reasonable and affordable payment amount.Private collectors almost always said this because they were paid a higher commission if they set up rehabilitation plans where borrowers paid certain minimum amounts.Despite these statements, borrowers have always been eligible to make reasonable and affordable payments.

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