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How to Get Out of Default on Student Loans

Student Loans
by Candace Bowers
February 9, 2023
7 min read
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Student loan default is not fun nor pretty. Defaulted loans can result in wage garnishment, tax refund offset, a tanking credit score, and more. Not all student loan lenders offer affordable monthly payments.

Federal student loans often have lower interest rates to help students avoid defaulting on their student loans. However, things happen. If you cannot afford your monthly loan payments and default, there's hope for you!

Defaulted borrowers are not sinking ships! It may appear to be a hopeless situation, but several options exist to get out of default. A defaulted loan is not the end of the world or your credit report. In this article, we cover ways to get out of student loan default. Student loan borrowers can recover their defaulted loans with options like rehabilitation payments, loan consolidation, or loan forgiveness.

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What Does It Mean for a Loan to Be in Default?

Failure to repay a student loan in accordance with the terms agreed upon in the promissory note is referred to as default. If federal student loan borrowers have not made a payment in more than 270 days (9 months), they will default on most federal student loans.

During the period student loan borrowers have not made monthly payments on their federal student loans, their loan servicer must attempt to collect the loan by making repeated efforts to locate and contact you about repayment. If you haven't received a letter from your loan servicer and suspect you're in default, contact them right away.

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According to the Consumer Financial Protection Bureau, private student loans typically default after three missed payments or 120 days. You can find your specific information about defaulting in your private loan's promissory note. Some private loans default even after one missed payment.

If your federal student loans are in default, there's a good chance your wages can be garnished. You might be able to work out repayment plans to avoid default if you are in arrears on your federal student loans and are being contacted by a debt collector.


What Is the Fastest Way to Get a Student Loan Out of Default?

Don't be discouraged if you are in default on federal student loans. There are options to help you recover from defaulting. Rehabilitation, consolidation, and repayment are the three unambiguous options provided by the Education Department for recovering from federal student loan default. If you act quickly enough, you can stop or prevent the effects of default; the best option for you will depend on your situation.

Repaying the defaulted federal student loan in full is one approach to getting out of default, but many borrowers find that impractical. For Direct Loans and FFEL Program Loans, a quick way to get out of default is by making nine payments consecutively. Let's take a look at the ways to recover from student loan default.

Loan Rehabilitation

For the majority of defaulted federal student loans, you must make a loan rehabilitation agreement consisting of nine consecutive monthly payments. Rehabilitation payments will vary depending on your monthly income.

You must contact your loan holder to begin the loan rehabilitation process. Rehabilitation of federal loans will remove student loan default from your credit report; however, previously reported late payments will remain.


Loan Consolidation

Loan consolidation allows you to repay your defaulted federal student loans by combining them into a new Direct Consolidation Loan. Borrowers of consolidation loans must consent to repay the new Direct Consolidation Loan in accordance with an income-driven repayment plan or by making three consecutive full monthly payments on the defaulted loan prior to consolidation.

More information about student loan consolidation can be found on the Federal Student Aid website.

Repayment in Full

Repaying your student loan debt in full will pay off your defaulted loan. Log in to the Federal Student Aid website to view your loan servicer details to find your loan holder’s contact information to make a payment.

We recognize that full repayment may not be a viable option. In this case, you should concentrate on choosing between loan consolidation and loan rehabilitation.


What About Private Loans?

Unlike federal loans, private student loans don't have the same typical recovery alternatives. Private loan default penalties differ from lender to lender and can include sending your debt to a third-party collection agency or having your late payment reported to credit bureaus. You must act swiftly if you are in danger of defaulting on a private student loan to lessen the harm to your credit score and prevent severe repercussions.

Examining your contract will assist you in determining when your lender will consider your loan to be in default. A private student loan can be considered default after one missed payment. Do not disregard the issue if you are unable to make your private student loan installments. Contact your loan holder immediately to weigh your repayment options.

You can consolidate private loans through refinancing or settle your private student loan debt by negotiating.

How Can I Avoid Defaulting Again?

Spend some time understanding the terms of your loan agreement and the different types of loans you are receiving. It's important to not borrow more than you need for your educational expenses. Below we've created some options to avoid defaulting on student loans.

Income-Driven Repayment Plan

Based on your salary and family size, an income-driven repayment plan establishes your monthly student loan payment at a reasonable amount. Federal student loans offer four different repayment plans to help you pay your student loans.

Deferment or Forbearance

You might be eligible for a deferment or forbearance if you're experiencing short-term financial hardship. Either option allows you to temporarily suspend your payments. However, interest typically accrues during your deferment or forbearance period. Meaning your loan balance will rise, and you will pay more interest over the life of the loan.

If you wish to apply for loan forgiveness in the future and opt for deferment or forbearance, you likely will not meet forgiveness requirements. If you choose deferment or forbearance, consider making monthly interest payments to avoid interest capitalization.


Create a Budget

To avoid defaulting again, create a financial plan to ensure you make your monthly payments on time and can afford them. A budget helps create financial stability and is important if you have debt. Budgeting helps you plan for both short-term and long-term expenses by ensuring that you don't spend more than you earn.

Set Up Auto-Pay

Consider setting up auto-pay to avoid missing any student loan payments. Many loan servicers offer lower interest rates or discounts to borrowers who opt for auto-payment. You can avoid late fees and paying extra interest. The convenience of auto-pay allows you to not worry about missing payments, and some lenders offer rewards for on-time consecutive payments.

Stay in Touch With Your Lender

It's important to contact your lender if you are unable to make your monthly payments. Discuss your situation and weigh the options they offer to avoid defaulting. It's also important to keep your contact information up to date.


Frequently Asked Questions About How to Get Out of Default on Student Loans

You may have questions about recovering from default on student loans or how works. Below you will find answers to some of the most frequently asked questions about recovering from student loan default.

Can you consolidate a defaulted student loan that is being collected through garnishment?

A defaulted loan that is being collected through wage garnishment or by court order cannot be consolidated. This is true until the wage garnishment order is withdrawn or the judgment is overturned.

Can you regain access to federal student aid?

You no longer qualify for federal student aid if you enter default. As a result, you cannot get federal loans or grants to pay for your schooling if you decide to go back to school. However, you can regain access to federal student aid. If you wish to do so, you must make six monthly payments on your defaulted loan.

These monthly loan payments will be approved by your loan holder at a reasonable and affordable amount. The payments must be made on time, in full, and consecutively.

Can student loans in default be forgiven?

No. Student loan forgiveness programs are not available for defaulted loans. You can escape default status, though, if you choose Fresh Start. The Fresh Start for Student Loan Borrowers in Default helps student loan borrowers out of default if their loans are eligible. Borrowers will be able to reapply for forgiveness programs, like Public Service Loan Forgiveness.

Are student loans removed from your credit report after ten years?

The debt may continue to appear on your credit record for up to seven years, even after the statute of limitations on it has expired. Federal student loans are exempt from the statute of limitations, but private student loans often have a six-year statute of limitations.

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Candace Bowers
Managing Editor

About Candace

As the Managing Editor at, Candace oversees the creation of valuable, well-crafted content and supports the Writing Team in delivering accurate and relevant information to assist students in navigating their academic and financial paths. She brings years of experience in writing and editing to the platform.

Candace graduated cum laude from Columbia University in the City of New York with a major in Creative Writing and a minor in English, focusing on nonfiction writing and Russian language studies. 


Candace has participated in a variety of writing workshops and seminars, including those focused on nonfiction and fiction writing, novel writing, technical writing, poetry, and editing. She has managed multiple blogs, overseeing their editorial work and SEO optimization, along with content creation, management, writing, and publications. Candace has also written multiple short stories, personal essays, and a children's book.

With a passion for uncovering opportunities and combating student debt, Candace is dedicated to informing students about financial support and resources. She possesses in-depth knowledge of private and federal student loans, institutional scholarships, grants, and fellowships. She leverages this knowledge alongside her editorial expertise and love for storytelling to create engaging and informative content that empowers students. 

Since joining the team in 2022, Candace has worked as a Content Writer and has since become a Managing Editor. She leads the Writing Team, guiding them to produce high-quality content that informs and empowers students. 

Her firsthand experience with the challenges of student debt gives her a unique perspective and a strong commitment to helping others navigate similar situations. This background fuels her dedication to identifying funding opportunities and offering valuable resources to students seeking financial aid and college insights.

Quote from Candace

“To attune co-creatively with our ever-transforming natural neighborhood, we must learn to re-learn. ”

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