You Have Options in dealing with Defaulted 

Federal Student Loans 

The Federal Rehabiltation Program

In 1986, to deal in part with the lingering efects of the recesion that began earlier
in the 1980s, the Federal Govenrment established an orderly and mandatory procedure to faciltate repayment and rehabiltation of ederal student loans that were in default.

The terms of this program for borowers whose loans were in default included:
a. The right to have monthly payments adjusted to one that is “reasonable and afordable based on the borower's total financial circumstances.” 20 U.S.C. §1078-6 (a)(1)(B).
b. The right o have the loan rehabiltated if the adjusted monthly payments are made
timely in nine of ten consecutive months. Id. (a)(1)(A); and

c. Once such nine payments have ben made, to have the fact of the prior default removed from the borower’s credit report. Id. (a)(1)(C).

The reasons for this program, particularly in times of economic instabilty are evident for both the borower and the lender. Creditors and those person(s) servicing defaulted loans and/or colecting on defaulted loans are obligated to notify borowers of their rights under the Federal student loan rehabiltation program. These rights include calculation of “reasonable and afordable” payments,acurate representation of sucesful rehabiltation’s efect on the borower’s credit, and the implicit right to not receive creditor, collector, or servicer representations contrary to the mandatory terms of that program. Without disclosure of these terms, federal student debtors would not know their rights under the program, would either remain in default with a blot on their credit, or continue to endeavor to make payments in exces of what hey are required to do.

If a creditor, collector, or servicer failed to offer you a rehabiltation option, consistent with the aforementioned guidelines, you may have legal options, such as filing a lawsuit against the creditor or servicer, to recover damages. 

Please contact Kim to discuss your legal options today.