Once you default on your federal student loans by failing to make payments, they’ll be placed in collection status. Your paycheck and tax refund could be garnished. You’ll also be ineligible for any other federal student loans, which may keep you from completing your degree. You can read more about what happens when you default on your federal student loans here.
There are three ways to bring your loans current:
Repayment – If the reason you fell behind on your loan was temporary (brief unemployment, for example), you bring your loan current by paying it in full.
Rehabilitation – Your lender may allow you to bring your student loan current by setting up an affordable repayment schedule. Keep in mind that late fees, penalties, and collection costs will be tacked on to the principal of your loan. Once you’ve rehabilitated your loan, you may be eligible for benefits such as forbearance, deferment, loan forgiveness, or even new loans to complete your education.
Loan consolidation – If you have more than one student loan, you may be able to consolidate them into a single loan. Consolidating will typically bring a longer repayment period and have the effect of lowering your monthly payment.
While bankruptcy won’t bring your loans current, it will stop any garnishment and may eliminate other debt you have that is making it difficult to keep your student loans current.
If you’re wondering if bankruptcy might be a good option to help you manage your student loan debt, we hope you’ll come in for a free, no-obligation consultation with an experienced Colorado bankruptcy attorney. You can make an appointment by calling 303.331.3403 or by using our online scheduling system.