Loan Relief & Rehabilitation

This section aims to address the concerns borrowers may encounter when dealing with the difficulties that come with student debt as well as provide an overview of the action steps to take in order to avoid, and even rehabilitate, a loan in default.

How does loan default happen? What do I do to avoid it? Who should I talk to when I feel like I have no options available to me?

Loan Delinquency 

From the moment you finish classes and officially become a college graduate, life becomes a series of transitions...the possibilities for where life could take you next seem endless. As you imagine what the future may hold, you probably aren’t picturing yourself struggling to keep up with your loan payments.

Yet the reality is missing a loan payment or falling behind in repayment can and does happen. Loan delinquency, or being past due, occurs the first day after you fail to make the required payment on your student loan. You can resolve loan delinquency by paying the past due amount or making another arrangement with your servicer, such as picking a new repayment plan or asking for a forbearance, a postponement of payment on your loan. If you are not able to make the past due payment and do not make other arrangements with your loan servicer, you will continue to be delinquent.

If you remain in a status of loan delinquency for 90 days or more, your loan servicer will report the missed payments to the three credit reporting bureaus, leading to negative marks on your credit history. These implications could make it difficult for you to set up utilities, obtain homeowner’s insurance, or get approved to rent an apartment. Should your loans continue to be in a status of delinquency for a total of 270 days, you will then progress to loan default. 

Loan Default 

As stated above, a loan in a status of default occurs after 270 days of consecutive, missed payments. When a loan enters into default, the loan servicer transfers your account to a collection agency. The collection agency will begin to reach out and attempt to collect payments on the defaulted loan. While loan default may seem very similar to loan delinquency, there are several significant repercussions that can occur once a loan is in default: 

  • The entire unpaid balance of your loan and any interest you owe becomes immediately due
  • You are no longer eligible to choose a repayment plan
  • You can no longer receive deferment or forbearance
  • The default is reported to credit bureaus, damaging your credit rating 
  • Your tax refunds and federal benefit payments may be withheld and applied toward repayment of your defaulted loan 
  • Your employer may be required to withhold a portion of your pay and send it to your loan holder to repay your defaulted loan
  • Your loan holder can take you to court
  • You may be charged court costs, collection fees, attorney’s fees, and other costs associated with the collection process

Loan default is a serious and costly consequence of missing loan payments. Many find themselves in loan default out of the stress, fear, and feelings of hopelessness that nothing can be done and that there is absolutely no option available to make their situation better...

Loan relief 

Depending on the type of loan you have, your lender or servicer may have options for you to consider that may help to provide assistance and relief during the repayment process. These options may include: 

  • Loan Forbearance- A partial or total pause on payments 
  • Loan Deferment- A total pause on payments; may include a pause on interest accrual, but only for Subsidized Loans
  • Loan Consolidation- A process to combine multiple loans into one, which generally includes extending the repayment timeline; only offered through the Department of Education for federal loan programs 
  • Adjustment of Repayment Term/ Plan- Your lender or servicer may be able to change the terms of repayment or offer you a different repayment plan. However, federal loan borrowers are generally the only individuals with access to repayment plan options based on income. 

To further explore loan relief options, contact your lender or servicer directly. 

For individuals with Duke Institutional Loans, more information on loan relief options can be found on Duke's loan servicer website, Heartland ECSI.

Loan Rehabilitation 

For folks in loan default, there is a solution to help you. The Federal Government offers the opportunity to rehabilitate a loan in default ONE time to their borrowers.

Loan rehabilitation requires the following:

  • Contacting the collection agency or entity that currently holds your loan 
    • You will most likely have received several emails, letters, and/or phone calls from them regarding the collection of your defaulted loan. If you are not sure who is your current loan holder, log on to your account with "My Federal Student Aid" 
  •  Agreeing, in writing, to make nine voluntary, reasonable, and affordable monthly payments within 20 days of the due date
    • The affordable monthly payment is determined by your loan holder
  • Making all nine payments during a period of 10 consecutive months

If successfully completed, loan rehabilitation will result in:

  • Removal of default status on your loan 
  • Discontinuation of wage garnishing by your employer 
  • Renewed eligibility for certain loan benefits such as deferment, forbearance, a choice of repayment plans, and loan forgiveness
  • Removal of default on the rehabilitated loan from your credit history
    • Please note- Your credit history will still show late payments that were reported by your loan holder during loan delinquency 

Student debt can be overwhelming and there are options to help reduce your stress, alleviate the burden of loan payments, and identify real solutions that can make a positive difference to you and your financial situation. For more details on federal loan delinquency, federal loan default, and federal loan rehabilitation, continue reading about this topic on the Federal Student Aid website.

Duke Loan Forms

If you borrowed a Duke Institutional Loan, you may need to submit certain forms and other documentation during repayment, especially when needing to explore loan relief or rehabilitation options. Respective forms can be found on Heartland ECSI's website, the servicer for Duke Loans. 

Link to Loan Forms on Heartland ECSI Site

Podcast Episode

Looking for additional insight into the impacts of loan default? Check out this podcast, facilitated by Student Loan Planner, and hear from two student loan attorneys as they breakdown their professional experiences with default.

Link to Student Loan Default Guide Podcast