Pay off student loans to improve your credit score.
You have six to nine months after college graduation to begin paying back your college loan. Defaulting on a student loan by not making payments can cause negative consequences such as losing the ability to apply for another federal loan, garnishment of wages, tax refund offsets on the state and federal level, and a decreased credit score. You can reduce what you owe on a student loan by making monthly payments after removing the default status on your loan.
Instructions
1. Call the U.S. Department of Education's Federal Student Aid Payment office for defaulted Direct Student Loans at 800-621-3115, locate a loan payment stub or collection notice, or use a loan locator on the Internet to figure out who currently holds your defaulted student loan.
2. Contact the agency that holds your loan and explain that you want to rehabilitate your loan from default status. This will be noted by the agency on your account and on your credit history.
3. Arrange a monthly payment amount that you can afford and that is accepted by the lender holding your loan. This may require you to prove unemployment status or to show back statements.
4. Send six monthly payments within 15 days of your monthly payment-due dates to re-establish your eligibility. Once you have made nine consecutive payments on time and in full within a 10-month period, your loan is rehabilitated out of default status. This allows the default status to be lifted from your account.
5. Continue to make your monthly payments on time and in full to reduce the money owed on the loan and to improve your credit score. Pay more than the minimum each month, if possible, to further reduce the amount owed and to pay down interest.
Tags: your loan, default status, credit score, monthly payments, student loan, your credit