Solving Student Loan Problems

There is nothing quite like a student loan. There is no statute of limitation for collectability, and the longer you ignore the problem, the worse it gets. But there is good credit repair news. Here are some easy and affordable ways to resolve your student loan issues – starting now!

A Little History

Prior to 1991 the Department of Education was empowered to collect delinquent student loans for six years. A 1991 amendment to the Higher U.S. Department of Education Act lifted all time limits for collection. And the amendment was retroactive; student loans that were beyond the statute of limitation for collection prior to the amendment became collectable again. And finally, to seal the deal, a 1998 change in federal law made it virtually impossible to discharge student loan debt in a bankruptcy.

The Logic

Why should student loan debt be collectable forever? The theory is simple; the cost of student loans can be kept low by minimizing the number of borrowers that don’t repay. And since education and the availability of low cost education loans is always a political priority, it was not hard to enact these changes.

The Ultimate Collectors

So what happens if you don’t pay? Well, the U.S. Department of Education has the right to garnish wages, grab your tax refunds, and even seize a percentage of your Social Security Checks, all without a court order. And, although Sallie Mae does not wield the same powers, they have started turning cases over to the U.S. Department of Education to get the job done. Anyone attempting credit repair should deal with their student loans head on, and the sooner the better.

Credit Repair Options

There are two great solutions designed to resolve your student loan issues. Both of these options can stop collection activity, lower your payment, and reinstate your right to borrow more money for school (in case you want to go back to school). There are no qualification requirements and you are not punished for having bad credit. Everyone gets the same low interest rate. The two options are consolidation and rehabilitation. Both are a good fit with your credit repair program.

Student Loan Consolidation

Just contact the lender or collector and tell them that you would like to consolidate your defaulted loans. You will be required to make three monthly payments on time. Once you have done this you will qualify for consolidation. If you are attempting credit repair you should note that after consolidation your credit report will be updated to show the consolidated status, but the default notation will remain for seven years. If you are in a rough patch the consolidation program allows for up to three years forbearance. Ask your lender for details.


Rehabilitation is a slightly longer process than consolidation, but has the extra benefit of removing the default status notation from your credit report. To rehabilitate your loan you need to make nine to twelve consecutive on-time payments (depending on which type of student loan you have). Once you have completed this process your loan is considered “seasoned” and is sold to a new lender, and the default is wiped off of your credit. A nice touch.

Getting Started

Before approaching your lender or collector to discuss your choices we recommend that you contact one of the resources established to provide guidance on these issues. Both of these resources are there for you, and you should call without fear. Please contact the Student Loan Ombudsman Office at (877) 557-2575, or the Federal Student Aid Information Center at (800) 4FED-AID to discuss your rights.