Student Loan Basics

Your Rights

Many borrowers are unaware of the various program options available to them. In many cases, avoiding delinquency and default may not involve making payments immediately.


Understanding the terms of your student loans and the rules and regulations surrounding federally guaranteed education loans is the first step in taking control of your obligations:

  • You have the right to deferment
  • You have the right to forbearance
  • You have the right to flexible repayment options
  • You have the right to loan consolidation
  • You have the right to loan rehabilitation


To qualify, you must act in a timely manner to obtain approval from your lender or servicer. Our loan counselors stand ready to answer any questions you may have and to help you qualify for a number of programs designed to save your loans from delinquency and potential default.


Your Responsibilities

  • Contact your lender/servicer and notify them of any changes to your contact information
  • Begin repaying your loan when your grace period ends
  • Make your minimum monthly payments on time
  • Contact your lender/servicer timely when making forbearance or deferment requests

Consequences of Default

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Many borrowers do not fully understand the consequences of allowing their student loans to enter a defaulted status. As a result, payments are often not made with the urgency required and many options, such as loan consolidation or income-dependent repayment plans, are not pursued.


The following are just some of the situations you may find yourself in, should you default on your federal student loans:

  • Ineligible for payment arrangements (entire balance is due in full)
  • Ineligible for deferment or forbearance
  • Negative impacts to credit bureau report
  • Ineligible for certain federal loans or grants
  • Up to 15% of wages may be garnished
  • Sued for repayment (liens may be placed against assets)
  • Federal and state refunds (e.g. tax refunds) may be withheld
  • Up to 25% in collection fees may be added to the loan balance
  • Loans may be referred to collection agencies

Be aware that there is no statute of limitations on defaulted student loans.


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Qualifying for deferment allows you to TEMPORARILY postpone repayment of your federally guaranteed student loan for certain, approved reasons.


You may qualify for a deferment should you find yourself in the following circumstances:

  • You are enrolled in school or are participating in a graduate fellowship
  • You are unemployed
  • You are experiencing serious economic hardship
  • You are receiving work-related training from an approved rehabilitation agency


This is not a comprehensive list of all deferment options. There are specific forms required to apply for various deferments. If you think you may be eligible for a deferment, please contact one of our counselors.


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Forbearance is a TEMPORARY postponement of your loan payments due to a temporary financial hardship. However, unlike a deferment, interest continues to accrue during the postponement and then capitalizes at the end of the forbearance period.


As forbearance programs are different for each lender in terms of eligibility requirements and repayment responsibilities, we strongly encourage you to contact one of our counselors if you are interested applying for a forbearance.


Our counselors will help you understand the implications of obtaining a forbearance, which may include increased monthly payments after your forbearance period ends.

Repaying Your Federal Student Loans

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Understanding all of the repayment options available to you will help you to better meet your Federal education loan obligations in the most affordable manner possible.


Our counselors are available to explain the benefits and implications of various repayment plans, which include:

  • Standard Repayment
  • Extended Repayment
  • Graduated Repayment
  • Income-Contingent Repayment
  • Income-Sensitive Repayment
  • Income-Based Repayment


In most cases, student-borrowers are allowed to change their repayment plan. However, choosing a plan with low monthly payments generally extends the length of the loan and increases the amount of interest owed. Each repayment plan’s loan term, minimum payment criteria, and loan program requirements vary. Our counselors will help you assess which plan suits your particular financial situation and will also suggest consolidation, forbearance, and deferment options when appropriate.


Even if you have already defaulted on your student loan, you may be able to rehabilitate the loan by making a series of qualifying payments. Rehabilitation allows you to once again qualify for Federal education loans and removes negative impacts to your credit history.


You should contact an i3 counselor to discuss your next move if you are struggling with your current repayment plan, are interested in loan consolidation or rehabilitation, or simply want to learn more about your options.

Federal Student Loan Rehabilitation

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Loan rehabilitation is a unique opportunity for you to have your defaulted student loans deleted from your credit bureau report. You will have to qualify for this program by making 9 on-time payments over a 10 month period to show good faith in repaying your defaulted loans.


Rehabilitation has significant benefits such as:

  • Defaulted loans currently reported are deleted from Credit Bureau Report.
  • Repayment terms of 9-30 years based on loan balance. 
  • Reduction of balance if collection fees have been added to your balance
  • Elimination of collection activity.
  • Ability to qualify for further Title IV funds.


Rehabilitation rules are very specific and involve performing certain activities within defined timeframes. If you would like to learn more about rehabilitating a defaulted federal student loan, you should contact an i3 counselor to learn more about the process.

The information contained on this site is for informational purposes only and is not a comprehensive guide. This information does not replace any of the provisions of the terms of your student loan agreements. The advice provided here is intended as a service to the student/borrower and does not constitute legal opinion.