How to Get Out of Student Loan Default

What to do if you've defaulted on student loans, whether federal or private.

If you've defaulted on a student loan, how to get out of default depends on whether the loan is federal or private.

Getting Your Federal Student Loans Out of Default

Your options for getting your federal student loans out of default include:

  • repaying the loans
  • rehabilitating the loans, or
  • consolidating the loans.

Paying off your loans. This is the fastest (and usually the least expensive) way to clear your default. Of course, if you could just pay off the debt, you probably wouldn't be in default. Most borrowers in default can't afford this option and must consider loan rehabilitation or consolidation.

Rehabilitating your loans. Rehabilitation allows you to bring your loans into good standing by making a certain number of "reasonable and affordable" payments. You must set up this payment plan through the Department of Education, or through your school if you have a federal Perkins Loan. Rehabilitation will stop collection efforts and restore your eligibility for the benefits previously associated with your loan, such as deferment, forbearance, flexible payment plans, and ability to apply for additional federal student aid.

Consolidating your loans. After you have made an agreed-upon number of consecutive, voluntary, on-time payments, you may be able to combine your loans into just one loan with a low, fixed interest rate. 

To explore your options for getting your federal loans out of default, we recommend the Student Loan Debt Collection Assistant, an interactive tool published by the Department of Education and the Consumer Financial Protection Bureau. By answering just a few simple questions, you can find the best way to get current on your loans and the steps you need to take to do so.

Getting Your Private Student Loans Out of Default

Your private student loan may default if you miss just one or two payments -- or automatically, if you file bankruptcy or default on another loan. If your private loan is in default, there's no simple prescription for dealing with the lender or collection agency. But you may be able to negotiate a payment plan, or settle your debt for less than you currently owe. Contact your lender to try to work out a plan that's agreeable to both of you. 

The Student Loan Collection Assistant, discussed just above, provides information to help you navigate private loan default, too. It's a great place to start.

Learn More

For more details on federal student loan default, read the U.S. Department of Education's guide to getting out of default.

To find out more about the consequences of default, see "What Happens If I Default on My Student Loans?"

To learn how to deal with aggressive debt collectors, see "Unfair Student Loan Collection Practices: How to Fight Back."

Jurisdictional relevance: US

Legal Consumer - CaliforniaLaw. The content of this article pertains to all US states and counties.