How to Get Your Student Loan Out of Default

If you’re in default on your student loan , don’t despair. You have options. You can get your loan out of default by consolidating your loans, entering into a repayment plan, or making payments on your own.

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If you have a student loan in default, it means you’ve failed to make payments on your loan according to the terms of your promissory note. If you’re in default, it’s important to take action to get your loan out of default as soon as possible. Defaulting on your loan has serious consequences that can damage your credit rating and make it difficult to get a car loan, buy a home, or get a job.

There are two ways to get your loan out of default: loan rehabilitation and loan consolidation.

Loan rehabilitation is a process where you work with your lender to develop a payment plan that you can afford. Once you make 9 monthly payments, the default status on your credit report will be removed and you can begin rebuilding your credit.

Loan consolidation is a process where you combine one or more loans into a new single loan. This new loan will have a new interest rate based on the weighted average of the interest rates of the loans being consolidated. consolidating your loans will not remove the default status from your credit report, but it may lower your monthly payment which can help you get current on your payments.

If you’re not sure which option is best for you, contact your lender or servicer for more information.

The Consequences of Defaulting on Your Student Loans

If you default on your federal student loans, you will face serious consequences. The entire balance of your loan will become immediately due and your loan will be placed with a collection agency. Your credit score will be negatively affected, which could make it difficult for you to get approved for a car loan, a mortgage, or even a credit card. In addition, your wages could be garnished and your tax refund could be withheld to repay your debt. If you’re struggling to make your student loan payments, contact your loan servicer immediately to discuss your options.

How to Get Your Loan Out of Default

If you are in default on your student loan, you have a few options to get your loan out of default. You can either enter into a repayment plan, consolidate your loan, or rehabilitate your loan. Let’s go over the details of each option.

Direct Consolidation Loan

If you have multiple federal student loans, you can consolidate them into a single Direct Consolidation Loan from the U.S. Department of Education. Your interest rate will be a weighted average of the interest rates on your existing loans, and you’ll have up to three years to repay the loan. You can also choose among different repayment plans, including income-driven repayment plans that base your monthly payment on your income and family size.

You can apply for a Direct Consolidation Loan at or by contacting your loan servicer. If you include FFEL Program or Perkins Loans in your consolidation, you may lose certain borrower benefits on those loans.

Loan Rehabilitation

The best way to get your loan out of default is to rehabilitate it. Loan rehabilitation is a voluntary repayment program where you make nine (9) monthly payments within twenty (20) days of the due date over a ten (10) consecutive month period. To be eligible, you must not have made a payment on your defaulted loan in
the last seven (7) years and you must agree to make nine (9) consecutive monthly payments. If you make all nine (9) payments on time and in full, the default notation will be removed from your credit report, and you will be able to obtain new federal student aid.

Loan Forgiveness

Loan forgiveness sounds great, but it’s not always easy to get. You might be able to get your loans forgiven if you:

Work in a public service job: If you have Direct Loans, you may be eligible for the Public Service Loan Forgiveness Program. To qualify, you must work full-time for a government organization or nonprofit organization and make 120 qualifying monthly payments on your loan after Oct. 1, 2007.

Join the military: If you have Direct Loans or FFEL program loans, you may be eligible for the Perkins Loan Cancellation and Discharge program. Under this program, you may have all or part of your loan forgiven if you serve in certain occupations like teaching or law enforcement or in areas with shortages of nurses, physical therapists and other health care professionals.

Have a total and permanent disability: If you are unable to work because of a physical or mental disability, you may be eligible for a Total and Permanent Disability (TPD) discharge of your federal student loans.


The best way to get your student loan out of default is to start making payments as soon as possible. You can also try to negotiate with your lender for a new repayment plan or a deferment or forbearance on your loan. If you can’t afford to make payments, you may be able to consolidate your loans or discharge them through bankruptcy.

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