The Pros and Cons of Student Loan Rehab

Nicolas Cesare  | 

If you have student loans in default, then you’ve probably considered whether or not you should do student loan rehabilitation (or student loan rehab) to recover from default. However, getting out of default is a big decision and not one that you should approach lightly. Before you choose student loan rehab or any alternative methods for getting out of default, you should make sure that you know what your getting into — read on to learn the pros and cons of student loan rehab.

What Student Loan Rehabilitation Does

Student loan rehab is the most straightforward way of getting your student loans out of default. If you decide to do student loan rehab, then you’ll work with your loan provider to find a reasonable amount for you to pay towards your debt each month. If you’re able to keep up with this negotiated payment schedule for nine payments in a row, then your student loans will be taken out of default, you’ll regain all of the privileges of a student debt holder who isn’t in default, and — perhaps most importantly — any record of your default will be wiped from credit report.

Those are the basics of what the process is, but how can you tell whether or not you should do student loan rehab?

Pros of Student Loan Rehab

Here are some of the pros of doing student loan rehab.

  • Your student loan default is wiped from your credit history. This is probably the most important reason why you can do student loan rehab. Unlike some other methods for getting out of default, going through the rehab process will actually lead to the default being completely removed from your credit history. This means that it will no longer be dragging your credit score down, paving the way for you to start fixing your credit. Having a good credit score is incredibly important when it comes to getting personal loans, opening a new credit card, or even negotiating about your current credit card.
  • You will be able to change your repayment plan when you’ve finished rehab. There’s a good chance that the reason why you went into default in the first place is that you weren’t able to keep up on your student loan payments. However, once you’re out of default, you’ll be able to pick an income-based or pay-as-you-earn plan that will set you up with a monthly payment that’s reasonable for your economic situation.
  • You will regain eligibility for loan-assistance programs like deference or even forgiveness. Programs like loan deference and forgiveness exist to help you pay off your student loans in spite of financial difficulty on your part. As long as your student loans are in default, you won’t be eligible for any of the programs, even if you meet all of the other requirements.

Cons of Student Loan Rehab

  • You can only do it once per loan. Student loan rehab is a powerful tool for getting out of default, but the catch is that you can only do it once for a given loan that’s in default. If you do decide to rehab your loans, make sure that you’ve got a plan to keep up with your payments once rehab is done. If you go back into default later, you may have wasted all that effort on rehab for nothing.
  • If you’re considering student loan rehab, then you’re already in default. The best thing that you can do about student loan default is to avoid it completely. If you haven’t defaulted on your student loans yet, then it’s not too late to make a personal budget for yourself that will take your monthly loan payments into account. Learn about how you can pay off your student loans to make sure that you never end up in default.

Student loan rehab is often a great idea for getting your loans out of default. However, if you’re unsure that you’ll be able to stick to a regular repayment schedule once your rehab is finished, it might be best to hold off until you have the necessary financial stability.

Looking for more ways to improve your credit? Visit our credit score resource center for tips and guides.


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Nick Cesare is a writer from Boise, ID. In his free time he enjoys rock climbing and making avocado toast.

This post was updated January 10, 2018. It was originally published December 16, 2017.