Repayment Challenges
If you have missed 1 or more monthly payments on your student loans, you have several options to get back on track. Falling seriously behind can lead to default, which can have many negative consequences. But don’t despair—there are many ways to turn your situation around! The most important thing to do is contact your student loan holder and ask for help.
Delinquency
If you have fallen a few months behind in your student loan payments, contact your student loan lender immediately. They can work with you to find a repayment solution that fits your situation. If your student loans have been guaranteed by American Student Assistance, you can contact one of our student loan specialists, Monday – Thursday, 8 a.m. to 10 p.m.; Friday 8 a.m. to 5 p.m.; and Saturday 8 a.m. to 12 p.m. Eastern Time, at 800.343.8883 or wellnesscounselor@amsa.com.
Your student lender may suggest you change your repayment schedule to make your monthly payments more affordable. Flexible repayment options include: Consolidation, Income-Sensitive, Extended, or Graduated Repayment.
Repayment options
If you owe more than $30,000 in federal student loans, Extended Repayment will stretch your repayment period to 25 years. This option is available to borrowers whose oldest loan was originated on or after October 7, 1998. Extended Repayment will increase the total amount of interest you repay over the life of your loan.
Another option is Graduated Repayment. This schedule will reduce your monthly payments by giving you smaller payments, as low as interest-only, upfront for up to 4 years. Your payments will then increase gradually so that the loan is repaid in the same amount of time as under Standard Repayment. Graduated Repayment will increase the total amount of interest you repay over the life of your loan.
If your income is low, you may want to choose Income-Sensitive Repayment, which allows you to pick a monthly payment equal to any amount between 4% and 25% of your gross monthly income. You may be able to use this option for up to 5 years, and it may extend your repayment term to up to 15 years. Income-Sensitive Repayment will increase the total amount of interest you repay over the life of your loan. You can change your repayment schedule once a year by contacting your servicer.
Consolidating may also reduce your monthly payments.
Postpone Your Payments if You Qualify
If you are facing a situation which makes it impossible for you to make your payments, you may be able to temporarily postpone your payments with a deferment or forbearance if you are unemployed, facing an economic hardship, or meet other criteria.
Deferment
A deferment allows you to temporarily adjust your monthly repayment schedule by suspending your student loan payments if you meet certain criteria. Conditions such as unemployment, enrolling in school at least half-time, or being on active duty with the military may qualify you for a deferment. Visit our forms page for a complete listing of deferment types and criteria. During a deferment, interest will accrue and be due on unsubsidized loans; however, the Department of Education will pay the interest that accrues on any subsidized loans. In order to get a deferment for your loans, you must complete an application and submit it to your lender. Borrowers must request deferments, as they cannot automatically be granted by a lender. A lender can grant a deferment to a borrower who is already being deferred for same reason and time period with another lender. FFELP lenders can use information obtained from another FFELP loan lender, the Secretary of Education (for Direct Loans), or an authoritative electronic database maintained or authorized by the Secretary of Education. Please do not submit deferment applications to American Student Assistance.
If you’re currently serving in the Armed Forces and unable to request a military deferment personally, a representative can complete this process on your behalf. Some deferments, such as an Economic Hardship deferment, require you to submit supporting documentation with your application. Your lender will review the application, and if you meet the criteria for the deferment and have not exhausted the time available for it, your lender is required to grant you the deferment. You should continue to make your monthly loan payments until your lender notifies you that your deferment has been granted.
Forbearance
If you are having trouble making your student loan payments, you don’t meet the criteria for a deferment, and you have fully explored changing your repayment schedule to reduce your payments, you may qualify for a forbearance. Forbearance is usually reserved for cases of financial hardship or illness. While you must be granted a deferment if you meet the criteria, lenders are generally not required to grant you a forbearance, and they may require you to provide reasons and documentation for the request.
Like a deferment, a forbearance is a temporary adjustment to your monthly repayment schedule. However, unlike a deferment, interest accrues and is due on all types of loans. You may pay this interest as it accrues, or the interest can be added onto your principal loan balance (capitalized). For this reason, it is strongly recommended that you attempt to qualify for a deferment and explore changing your repayment schedule to lower your monthly payments prior to applying for a forbearance. To get a forbearance, you can obtain an application from your lender. Return it to your lender for review along with any supporting documentation the application calls for. Your lender may grant you a verbal forbearance over the phone. If you’re not sure who your lender is or how to reach them, please call American Student Assistance at 800.999.9080, and we’ll help you find out. You should continue to make your monthly loan payments until your lender notifies you that your forbearance has been granted.
Default
Student loan default occurs when you fail to make your monthly payment for 270 days (9 months). Default is serious, and your entire loan balance is due in full immediately upon default.
If you do not address your defaulted loan, many negative consequences may occur:
- – Up to 15% of your wages may be garnished to repay your debt.
- – Your entire federal tax refund may be seized to repay your defaulted student loans. Some state tax refunds may be seized, as well.
- – An employer may rescind a job offer based on your poor credit report.
- – You could be declined for a mortgage, car loan, apartment lease, or other credit due to your defaulted loans.
- – You are ineligible for additional federal financial aid until you make 6 qualifying payments.
Bright Beginnings Defaulted Loan Rehabilitation Program
Rehabilitation is a federally mandated program that gives federal student loan borrowers a way to bring their loan(s) out of default. Rehabilitation can reverse the many negative consequences of defaulting on your student loan, and participation is one of your rights as a federal education loan borrower.
American Student Assistance calls its rehabilitation program Bright Beginnings. It can put your defaulted loans back in good standing, improve your credit, and help you develop good repayment habits once again.
Benefits of Bright Beginnings rehabilitation
- – Derogatory information (as reported by ASA) will be deleted from your credit report.
- – You will once again be eligible for federal financial aid, so you can continue to pursue higher education.
- – Your ASA loan will no longer be considered in default, so you do not have to worry about wage garnishment or seizure of your tax refunds.
- – You will regain eligibility to apply for any deferment or forbearance benefits not used prior to default.
- – Your entire outstanding balance will no longer be due in full, at all times.
How does the defaulted loan rehabilitation program work?
- – You must make 9 qualifying on-time payments to ASA.
- – You must make all 9 payments within 20 days of the due date. If you fail to make all 9 payments within that time frame, you may need to begin the program again.
- – Once you have made the required number of consecutive payments, ASA will send you a Rehabilitation Agreement. You must fill out completely and sign this agreement, and return it to ASA in order to complete the loan rehabilitation program.
- – Do not stop making payments to ASA until you receive notification to do so. Ceasing to make qualifying monthly payments could cause you to lose your eligibility for rehabilitation.
- – After you have returned your completed agreement, ASA will transfer your loan to a new lender and servicer. At that point, your loan will be out of default.
- – You will then make on-time monthly payments to your new servicer.
Making qualifying payments under the rehabilitation program will stop your defaulted loan from being designated for wage garnishment or tax refund seizure. If your defaulted loan(s) was guaranteed by ASA, contact an ASA Payment Advisor at 800.343.2120 (option #1) to begin the rehabilitation program.
Hours of operation
Monday through Thursday, 8:00 a.m. – 8:00 p.m.
Friday, 8:00 a.m. – 5:00 p.m.
Saturday, 8:00 a.m. – 12:00 p.m.
