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Ask The Expert

By Victoria Thompson

Have you made a federal student loan payment in the last three months? About 11 percent of federal student loan borrowers have not and are therefore in default. That default rate only represents the borrowers entering repayment. (See freep.com/story/news/local/michigan/2016/10/02/rate-student-loan-defaults-slows-michigan/91330184/ , Oct. 2, 2016.) More than 8.1 million Americans are behind on federal student loan payments. If you risk facing this dilemma, consider these possibilities.

You could rehabilitate your loan. Rehabilitation of a Direct Loan or Federal Family Education Loan (FFEL) Program involves making nine monthly payments within a ten-month period; for a Perkins loan, the period is nine months. Once rehabilitation is complete, the loan is out of default and you are again eligible for different repayment options, forbearance, deferment, loan forgiveness, and additional federal student aid. (See studentaid.ed.gov/sa/repay-loans/default/get-out, Jan. 15, 2017.)

You could consolidate your loan(s). This move transfers your debt into a new fixed-interest-rate Direct Consolidation Loan, which you can repay through an income-based plan. Alternately, you can make three straight full monthly payments on time on a defaulted loan and then consolidate it, which allows you to repay the resulting Direct Consolidation Loan under any repayment plan for which you qualify. (See studentaid.ed.gov/sa/repay-loans/default/get-out, Jan. 15, 2017.)

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Victoria Thompson is a partner at Resolute Family Wealth Advisors. She can be reached at 720-464-5697, victoria.thompson@lpl.com.