How does the participant “cure” the past due payments during the cure period?

There are three options for curing the default, provided the action occurs during the cure period:

  1. Make a lump sum payment to bring the loan current.
  2. Increase payments so the loan is current by the end of the cure period.
  3. Refinance the loan, if the plan’s loan policy permits. Refinancing will pay off the old loan and begin a new loan. However, to avoid exceeding the IRS loan limitations, the new loan must not have a final payment date later than the original loan. In other words, the refinanced loan should merely re- amortize the amount due over the remaining loan period.