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Student loans, Debt collection

What are my options when dealing with a debt collection agency working for the U.S. Department of Education?

Generally speaking, you have three options when dealing with the collector of a federal student loan:

  1. Rehabilitation. Rehabilitation means that your loan will be taken out of default status after you make a series of consecutive (generally, nine) on-time, reasonable, and affordable payments. You can typically only rehabilitate a loan once.

    This is the only way to remove the default notation from your credit history. If you chose to go back to school, you'll be eligible for federal student aid again after you make the sixth of nine monthly payments.

  2. Repayment. If you can afford to pay off your defaulted federal loan, this is the fastest way to settle your debt. Under certain circumstances, your debt collector may be authorized to waive some of your outstanding fees and other collection costs. For some borrowers, this can be the cheapest way to bring a federal student loan out of default.

    Tip: Visit the CFPB's Paying for College tool for more information on repaying your student loans.

    Even after you've repaid, the debt will continue to appear on your credit report as a defaulted loan that was repaid. You'll also be eligible for federal student aid again, if you chose to go back to school.

  3. Consolidation. Through consolidation, your defaulted loans are paid off by a new loan with new repayment terms. If you can't afford to repay your loan in full, consolidation is the fastest way to get out of default and enroll in one of the U.S. Department of Education’s alternative payment plans. If you can't afford to pay off your loan in full, it's also the fastest way to get out of default and be eligible for federal student aid again.

    Warning: Consolidation will not undo the negative effect on your credit report caused by your default.

When speaking with a collector, be sure that you have written documentation about what federal student debt you owe. If you're concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform it of the problem. Remember, that system shows only your federal student loans, not your private student loans.

Tip: The CFPB prepared sample letters that you can use to respond to a debt collector who is trying to collect a debt along with tips on how to use them. The sample letters may help you to get information, set ground rules about any further communication, or protect some of your rights.

Remember that you have rights when dealing with debt collectors, and it is against the law for a collector to harass you or make false statements to you.

Tip: If you're having trouble with debt collection, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

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