Manage Student Loan Default

Click on the solid bars to expand or compress each of the topics.

ANNOUNCING FRESH START

For a limited time, you can easily get your VSAC federal loans out of default through the U.S. Department of Education’s temporary program, Fresh Start.

When you sign up for Fresh Start:

• VSAC will transfer your defaulted VSAC federal loans to Nelnet, a Department of Education loan servicer, to put your loans back into good standing; 
• VSAC will remove the record of default from your credit report; and 
• You will regain access to federal student aid and other benefits.

If you don’t sign up for Fresh Start before the program ends, you will stay in default, and collections on your loan will restart. This means your wages, tax refunds, or other government payments could be taken to repay your loans.

In as little as 10 minutes, you can sign up for Fresh Start for free by contacting VSAC:

• Phone: Call us at 800-954-2440 or 802-654-3787 in the Burlington area (TDD 800-281-3341). What to expect:
  • A counselor will confirm your request to sign up for Fresh Start to get out of default, and counsel you on the opportunity to sign up for an income-driven repayment plan, which will likely qualify you for a lower monthly payment than a standard plan.
  • Tip: Before calling, look up your income on your most recent federal tax return (line 11 of IRS Form 1040). But if you can’t find it or didn’t file taxes, don’t worry. You should still make the call!
• Email: Write to VSAC at collections@vsac.org. 
  • In your email, include your first name, account number, and request: “I would like to sign up for Fresh Start to bring my loans back into good standing.”
• Mail: Write to VSAC, PO Box 2000, Winooski, VT 05404. 
  • In your letter, include your name, account number, and request: “I would like to sign up for Fresh Start to bring my loans back into good standing.”  

For additional details on the Benefits of Fresh Start, visit studentaid.gov/freshstart.

Note: If you have other defaulted student loans held by the Department of Education or other guaranty agencies, you’ll need to contact those loan holders separately to sign up for Fresh Start on those loans.

CONSEQUENCES OF FEDERAL STUDENT LOAN DEFAULT

You may have a defaulted Federal Family Education Loan (FFEL) Program loan with VSAC.  VSAC federal loans include FFEL Stafford, FFEL PLUS loans, and FFEL Consolidation Loans.

By making a plan now, you can end the consequences of default on your VSAC federal loan, including:

• a ruined credit history
• placement with a collection agency
• wage garnishment
• confiscation of federal tax refunds or state tax refunds, property tax adjustments, and/or renter rebates through the Vermont Setoff Debt Collection Program to pay for your defaulted loan(s); or 
• loss of federal student aid eligibility

MANAGING FEDERAL STUDENT LOAN DEFAULT

Which option works best for you and helps you meet your goals? There are several options to fully repay or get your VSAC federal student loans—including Stafford, PLUS, and Consolidation loans—out of default. To learn more, read the details below.

If you still have questions, please call VSAC at 800-954-2440 or e-mail us at collections@vsac.org. VSAC can help!  

VSAC FEDERAL LOAN REHABILITATION PROGRAM—apply online

Remove your federal loan default by making monthly payments through federal loan rehabilitation. 

Use VSAC’s loan rehab calculator to calculate your payment amount and apply online for loan rehabilitation!

IMPORTANT! The online application is only for the FEDERAL loan rehabilitation program. To rehabilitate defaulted VSAC private loans, you must contact VSAC to determine your qualifying monthly payment amount and request a Private Loan Rehabilitation Agreement.

Federal loan rehabilitation is a one-time offer that lets you make payments based on your current income and overall financial situation. This program helps you get back into repayment on your student loan and removes the default from your credit history.

Take advantage of our loan rehabilitation program! To qualify, you’ll need to agree to make 9 on-time monthly payments within 10 months. You may only rehabilitate a loan once.

HERE’S HOW THE VSAC FEDERAL LOAN REHABILITATION PROGRAM WORKS:

We understand that you may not be able to make pay your full monthly payment. A loan rehabilitation payment amount is based on your financial situation. Here are some examples:

Example	Adjusted Gross Income (AGI)	State of Residence	Family Size	Monthly Payment
Single Person	$16,000	Vermont	1	$5
Single Person	$25,000	New Hampshire	1	$40
Married	$25,000	Vermont	2	$5
Married with Children	$80,000	Massachusetts	4	$438

 

1. Use VSAC’s loan rehab calculator to estimate monthly payments for your defaulted federal student loans, based on your financial situation. You can apply online or use the same link to print and sign a completed VSAC Loan Rehabilitation Agreement or Income and Expense Information form.

   You’ll need information from your most recent tax return, including Adjusted Gross Income and family size.

   Watch our video tutorial for more information on this option.

   Payment just right? If you accept the calculated monthly payment amount, provide VSAC with your tax return documentation showing your Adjusted Gross Income (AGI), family size, and state of residence. If you don't file taxes, please provide other proof of AGI, family size, and state of residence. For an online application, you can upload your documentation, or print, sign, and mail your agreement to VSAC.

   Payment too high? If the calculated monthly payment amount in step 1 is too high, you can request a lower payment by completing an Income and Expense Information form. To apply online, upload the completed form; or you can print, sign, and return the completed form. If approved, VSAC will send a VSAC Loan Rehabilitation Agreement for you to sign and return.

2. Successful loan rehab! Make 9 on-time qualifying payments during a 10-month period. VSAC will send you a monthly bill. Be sure to make your payments on time!

3. Credit repair. After you make your final payment, your loan will be transferred to a new loan servicer and VSAC will erase the default from your credit history. You also may be eligible for benefits and repayment options offered on your original loan.

DIRECT LOAN CONSOLIDATION

Consolidating your loan. You can combine your federal loans into a single consolidated loan with payments based on your income and loan amount. Once your consolidation is approved and complete, your credit report is updated to reflect that your defaulted loans are paid in full.  Unlike the VSAC loan rehabilitation program, the record of the default is not removed from your credit history.

You'll make payments on your new Direct Consolidation Loan to a new loan servicer. To learn more, visit the Department of Education’s Federal Student Aid website.

MAKE MONTHLY PAYMENTS

You can begin making one-time or automatically recurring monthly payments on your defaulted VSAC federal loan. Making unapproved payments will not remove your loan from default, so connect with VSAC to develop an approved payment plan and make a fresh start. Make payments now >

LOAN FORGIVENESS — new program announced

Forgiveness, cancellation, or discharge means that you no longer have to repay some or all of the money you borrowed. 

On August 24, 2022, the Biden-Harris Administration announced a Student Debt Relief Plan that includes loan forgiveness of up to $20,000 to Federal Pell Grant recipients and up to $10,000 to non-Pell Grant recipients. 

A VSAC defaulted FFEL loan with an outstanding balance as of June 30, 2022, may be eligible for relief under this program if certain maximum income criteria are also met. Get the details > 

Other Forgiveness
You may qualify for loan discharge based on Total and Permanent Disability. To learn more about other types of forgiveness, cancellation, and discharge available for the different types of federal student loans, visit the Department of Education’s Federal Student Aid website.

COLLECTION PARTNERS

VSAC also works with collection agencies to support student loan repayment, while ensuring that borrowers with loans in default are aware of the consequences of their failure to repay and are aware of the options available to help them get out of default. VSAC currently partners with the following agencies for collection expertise.

Windham Professionals 
Credit Control LLC 

If you don't know which agency is currently collecting your loan, please call us at 800-954-2440.

Click on the solid bars to expand or compress each of the topics.

CONSEQUENCES OF PRIVATE LOAN DEFAULT

Families generally borrow private loans to cover college costs that remain after borrowing federal loans.  VSAC private loans include Vermont Advantage loans or other VSAC-administered non-federal student loans. 

Make a plan now to end the consequences of default on your VSAC private loan:

• placement with a collection agency
• a ruined credit history
• confiscation of state tax refunds, property tax adjustments and/or renter rebates through the Vermont Setoff Debt Collection Program to pay for your defaulted loan(s)  
• or even a lawsuit against you.

MANAGING PRIVATE STUDENT LOAN DEFAULT

Got a goal? Let VSAC help you reach it!  

You have options available to get out of default on your VSAC private loan. Read the details below and if you still have questions, please call VSAC at 800-954-2440 or e-mail us at collections@vsac.org. VSAC can help!

INTRODUCING VSAC’S PRIVATE LOAN REHABILITATION PROGRAM

Remove your private loan default by making monthly payments through VSAC’s Private Loan Rehabilitation Program. Private loan rehabilitation is a one-time program that helps you get back into repayment!

How it works.

• Qualifying monthly payment amount is calculated based on your current balance and interest rate. The loan term is 30 years for variable interest rate loans or 20 years for fixed interest rate loans.

  What's next? Contact VSAC to determine your qualifying monthly payment amount and request a Private Loan Rehabilitation Agreement. Borrowers and any cosigner must each sign an agreement to participate.

• To qualify, you have to make 9 on-time payments within a 10-month period.

  What's next? Start making required payments after you contact VSAC.

• Successfully completing the Loan Rehabilitation Program removes the default from your credit history and may improve your credit rating.

  What's next? You may be on the path for meeting your goal!

• Eligibility for additional benefits upon successful loan rehabilitation, such as potential for limited short-term forbearance based on financial hardship and cosigner release.

  What's next? More benefits!

MAKE MONTHLY PAYMENTS

You can begin making one-time or automatically recurring monthly payments on your defaulted VSAC private loan. Making unapproved payments will not remove your loan from default, so connect with VSAC to develop an approved payment plan and make a fresh start. Make payments now >

COLLECTION PARTNERS

VSAC also works with collection agencies to support student loan repayment, while ensuring that borrowers with loans in default are aware of the consequences of their failure to repay and are aware of the options available to help them get out of default. VSAC currently partners with the following agencies for collection expertise.

Windham Professionals 
Credit Control LLC 

If you don't know which agency is currently collecting your loan, please call us at 800-954-2440.