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Resolving Loan Problems FAQ

This page answers questions about how to fix a problem when you know what the problem is.

The questions are listed first. For the answer to a question, click on that question.

We also have FAQs on other subjects:

How can I establish a reasonable and affordable payment plan?

For the pros and cons of each of the four available payment plans, see Repayment.

What is loan rehabilitation?

Under the loan rehabilitation program, you and your loan servicing agency agree on a reasonable and affordable payment plan. You must then make 12 consecutive on-time monthly payments for this amount. At the end of this 12-month period, the defaulted loan is purchased by a participating lender who then assumes servicing of your loan. You must pay the loan in full within nine years. For information about the benefits and consequences of loan rehabilitation, see Rehabilitation.

What is loan consolidation?

If you have multiple federal student loans, loan consolidation enables you to combine them into a single loan with one interest rate and repayment schedule. Loans that may be consolidated are those under the following programs:

  • All Title IV loan programs
  • Health Professions Student Loan (HPSL) Program
  • Health Education Assistance Loan (HEAL) Program
  • Nursing Student Loan Program (NSLP).

For more information on loan consolidation see Loan Consolidation.

I'm willing to pay the amount I originally borrowed (the principal) but not the interest. What can I do?

You should contact your loan servicer immediately. You may qualify for some form of payment relief. If you qualify and apply for federal interest subsidies on your loan during deferments, you loan balance will not increase during the deferment period because the government will be making interest payments on your behalf. However, if you do not qualify for federal interest subsidies on your deferment, or if your loan is in forbearance, your loan balance will increase by the amount of unpaid accrued interest.

How can I fix my credit?

If you’re having credit problems you may want to consider loan rehabilitation. Under this program, a new loan is created that removes the default status from your previous loans. If you are approved for rehabilitation, all derogatory information placed in your credit bureau files by the Department of Education or any of its collection agencies will be removed.

If you believe that your credit has been unfairly and incorrectly damaged, see credit bureaus for information on what you can do.

How can I be reinstated for Title IV loans?

If you have lost Title IV loans, you may want to consider loan rehbilitation. Under this program, after you have made six on-time monthly payments, you regain Title IV federal student loan eligibility.

Last updated/reviewed March 6, 2009

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