If you do not repay your educational loan on time, it will become delinquent and possibly default. This has serious consequences and can be very damaging to your credit rating. Since defaulted loans are reported to all national credit bureaus, you may encounter some of the following problems:
- The entire unpaid amount of your loan, including interest, will become immediately due and payable
- You may be liable for collection costs
- You may lose future eligibility for financial aid and/or educational loans (including Federal PLUS Loans)
- The references you supplied on your loan application may be contacted in an effort to locate you.
- You may lose deferment and forbearance options
- Your federal and state tax refunds may be withheld and applied to your loan balance
- Your Illinois professional license renewal may be denied
- Your employer may withhold part of your salary for payment of your loan
- Your loan may be referred to a collection agency
- Legal action may be taken against you
- Plus, you will still have to repay your loan!
To help you manage your educational loan debt, and to successfully repay your loan, stay in touch with your lender, financial aid office or ISAC. Also, read any mail you receive regarding your loan, keep records, stay current with your payments, and write your loan account number on all correspondence pieces with your lender, and on your checks.
If you are unable to make your monthly payments, contact your lender immediately to avoid default by considering alternative repayment options. Additionally, depending upon your circumstances, you may qualify for loan deferment, forbearance or forgiveness.
If your educational loan does default, you can get your credit rating reinstated. There are voluntary repayment options, loan options and other default resolution options.
Repayment Options for Defaulted Loans:
Payment in Full
You can pay off your account in full. Contact the holder of your loan to obtain your correct payoff balance and receive instructions on how to remit your payment.
Repayment Schedule
You may qualify for a repayment schedule based on your current financial situation. To establish an approved repayment schedule, you will need to contact the holder of your loan. It is important for you to communicate complete information regarding your financial circumstances in order to qualify for a repayment schedule.
If ISAC holds your loan, contact ISAC’s Collection Services Department
If you are unsure who holds your loan(s), call 800-433-3243, option 3, for assistance in locating your loan.
Other Default Resolution Options:
Loan Rehabilitation
If you have a defaulted educational loan and are interested in removing the default status from your credit bureau report, you may wish to participate in the Loan Rehabilitation program. To become eligible, you must voluntarily make nine approved and on-time payments within a consecutive ten-month period, and sign a Rehabilitation Agreement. Each of the nine payments must be made within 20 days of the due date. You may not pay a lump sum to qualify for loan rehabilitation. However, you may start over if you are unable to fully meet these requirements within a consecutive ten-month period.
Approximately 60 days after the qualifying payments have been made, and the signed Rehabilitation Agreement has been received, your loan will be repurchased by a participating lender to whom you will send all subsequent payments. The most important benefit for you is that the default status on your credit bureau report will be removed. Please contact the holder of your loan to receive additional information on this program.
If ISAC holds your loan, contact ISAC’s Collection Services Department.
If you are unsure who holds your loan(s), call 800-433-3243, option 3, for assistance locating your loan.
In most instances, a borrower is eligible for loan rehabilitation only once per loan.
Loan Consolidation
You can request that your educational loans be consolidated to remove them from a defaulted status. All eligible loans will be consolidated into a single, more manageable loan, with an extended repayment period. Your defaulted loan(s) will then be reported as paid in full to credit bureaus.
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