Loan Assignment Information
The U.S. Department of Education is mandating that all colleges and universities assign their defaulted Perkins loans that have been in default for two or more years. Prior to a loan being assigned, we will send out a courtesy letter 30 days prior informing you of our intent.
Why is my loan going to be assigned to the Department?
Your Perkins loan is being assigned because:
- You have not made the required payments on your federal Perkins loan held by UT Austin.
- You did not take action to clear the default status by making payments or applying for forbearance or deferment as allowed by the Perkins regulations.
- Our collection efforts have been unsuccessful.
Once my loan is assigned, what will happen?
More than likely, the loan will be placed with the Department of Education’s Default Resolution Group (DRG). The DRG may keep your loan or send it to one of the private debt collectors the government hires to help borrowers in default.
How does default affect me?
Consequences of student loans being assigned to the government include:
- Wage garnishment
- Withholding money from your tax refund or other Federal Payments (Treasury Offset)
- Ineligible for an FHA mortgage from the Federal Housing Administration
- Ineligible for Title IV Financial Aid (new federal student loans, grants, etc.)
- Loss of professional license (depending on state law)
- Loss of eligibility for loan forgiveness or repayment options based on income
- Negative credit reporting for the balance owed
What can I do to avoid having my loan assigned to the government?
We offer borrowers three options to recover from student loan default: repayment, loan rehabilitation, and loan consolidation. The best option for you depends on your priorities.
- Repayment of full balance – credit shows paid collection account
Once student loans default, the full amount owed —principal and interest — is immediately due (this is called acceleration). You have the choice to pay that amount and be done with your debt.
- Loan Rehabilitation – repairs your credit for this loan
Student loan rehabilitation is often the best option because it is the only one that removes the default from your credit report. You can rehabilitate your loans by contacting our office and asking to enter the loan rehabilitation program. Under the loan rehabilitation program terms, you must make nine consecutive on-time monthly loan payments sufficient to repay all of the past due interest, current due interest and late fees.
You can only rehabilitate a student loan once. If you choose this option, make sure your contact information is up to date and that you can afford your payments once you begin the process. The payment amount after rehabilitation is completed may increase or decrease depending on the amount of your remaining balance owed, which is amortized over 9.25 years. If you have already successfully rehabilitated your loan, this is no longer an option for you.
- Consolidation - If you need to quickly clear the debt and can’t pay it yourself
Borrowers looking to go back to school and apply for federal financial aid or clear CAIVRS to get an FHA mortgage need to get out of default quickly. If you can’t to pay the loan in full yourself, student loan consolidation is the fastest way out of default.
You can start the consolidation process by visiting studentaid.gov. Consolidation does not remove the default line from your credit report, but it gives you a fresh start.
Note: If you previously consolidated, you may be able to do so again. The new loan will be made under the Direct Loan Program.
Need help with your loans? Let’s talk.
If all of this sounds overwhelming, you may call us and we would be happy to discuss this information with you and help you decide what your best option is.
Contact Perkins/NDSL & Nurse Faculty Loan Program (NFLP) Services
Main Building, Room 4
The University of Texas at Austin
Perkins and NFLP Loan Services Main 4
110 Inner Campus Dr Stop K5308
Austin, Texas 78712-1669