The CARES Act allows borrowers to use student loan rehabilitation to dig out of default and not make payments until September 2022. If you still have defaulted federal student loans, start the rehabilitation program before the relief ends.
When the pause on student-loan payments ends, the U.S. Department of Education will restart collection efforts for 8 million borrowers in default. Those Americans will be subject to wage garnishment, tax refund withholding, and Social Security seizure when that happens. Democratic lawmakers urge the federal government to prevent that outcome by automatically removing the default status. But, as is true with blanket student loan forgiveness, that has yet to happen. Ultimately, the responsibility to get out of default rests with you.
Read on to learn how to use student loan rehabilitation to get out of default before the CARES Act benefits end.
***The Education Department announced the payment pause would be extended until August 31, 2022. The department added that it would grant more than 7 million borrowers in default a “fresh start” and automatically return their accounts to good standing before the freeze ends. There’s no word yet on when this change will happen. Read more about the Fresh Start student loan program.
Last March, lawmakers passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which offered help to federal student loan borrowers. Those protections, which were limited to federal student loans owned by the Department of Education, included:
Those measures were set to expire at the beginning of the Biden Administration. But with the economy still in recovery, Congress extended those protections several times. Back in August 2021, it was announced that the pandemic-related student loan relief would end on January 31, 2022. However, the Biden-Harris administration extended the freeze once more through Sept. 1, 2022.
Student loan rehabilitation is a one-shot program to get federal student loans out of default. Rehabilitation requires borrowers to make nine on-time payments — within 20 days of the due date — over 10 months. However, the CARES Act allows borrowers to skip those monthly payments and get credit for the nine required payments.
Lenders of private loans don’t offer rehabilitation as an option for loans that have defaulted. Here are some options to explore if you have charged-off private student loan debt.
Borrowers who signed the loan rehabilitation agreement before May 2021 should not have to make a payment to complete the program. The suspended payments count for the nine on-time payments.
You can check your payment status by contacting the Department of Education’s Default Resolution Group at 800-621-3115 or by checking MyEdDebt.
You’re not alone if you still have defaulted loans. More than 8 million borrowers remain in default on their federal student loans. You still have time to enter the rehabilitation program before collection activities resume in September 2022.
Follow these steps to rehabilitate student loans:
