Get Out of Debt Guy

Should I Rehabilitate My Student Loans Now?

Posted June 16, 2014

WRAL Reader Question

Dear Steve,

I have loans in default and I want to start the rehabilitation process. If I were to do that today my monthly payment wouldn't leave me with about $200 each month after paying rent and my other bills. Not to mention I am in desperate need of new car and I doubt I'll be able to find one with payments less than the $200 I would have left especially with defaulted student loans on my credit report.

My question is - with the new regulations on student debt rehabilitation going into effect in less than a month, would my rehabilitation payment be determined by those new regulations? If not, would my payments go down after July 1 to fit the new regulations? 


Click here to get my free my weekday email newsletter with the latest tips and advice on how to beat debt and do better financially. Subscribe now.

Dear Nicci,

I assume you are talking about federal student loans since private student loans don't have a rehabilitation process.

The old rehabilitation process does not make a lot of sense. Not only would you need to make at least nine full payments on top of a wage garnishment, if you had one, but the end result would be the loans would then show as current but the negative payment history would remain.

Under the new process that will start in July you will only need to make five payments and those payments will be income based and as low as zero dollars per month depending on your income. And just like the old program, after five payments the loans would no longer show as currently in default but the old negative payment history will remain on your credit reports. 

You will need to check with the U.S. Department of Education when new applications will be considered under the new program.

If you can wait, wait till next month.


Steve Rhode
WRAL Get Out of Debt Guy

If you have a credit or debt question you'd like to ask about, how to get out of debt, just click here and ask away.

If you'd like to stay posted on all the latest get out of debt news and scam alerts, subscribe to my free newsletter.


Please with your account to comment on this story. You also will need a Facebook account to comment.

Oldest First
View all

About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.