How to Recover From Student Loan Default

General

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If you don’t repay your student loan according to the terms agreed to in the promissory note, your loans go into default. Federal student loans are considered to be in default after 270 days of non-payment, while private loans are generally considered to be in default after 90 days of non-payment.

Though student loan default may seem like a permanent black mark, there are strategies you can use to bounce back from a defaulted student loan, such as rehabilitation, consolidation, and other options.

How do I recover from student loan default?

The recovery path after default depends on what type of loan you have defaulted on. Here’s how you can recover from federal loan default and private loan default.

Federal student loan default

If you have a defaulted federal loan, the Department of Education offers several options for rectifying it:

Federal student loan rehabilitation

Loan rehabilitation for Direct and FFEL loans requires you to agree in writing to make nine voluntary, reasonable, and affordable monthly payments within 20 days of the due date for 10 consecutive months.

Your loan holder will determine the monthly payment amount for you. The payment amount is determined by your discretionary income and the amount of your adjusted gross income that exceeds 150% of the poverty level for your family size and location.

The lender calculates 15% of your annual discretionary income and divides that number by 12 to determine your reasonable monthly payment. Monthly payments can be as low as $5, depending on the borrower’s income.

Good to know: You can rehabilitate Federal Perkins loans too, but you must make a full monthly payment within 20 days of the due date for nine consecutive months. The required monthly payment amount is determined by your lender.

Once your loan is rehabilitated, the default status is removed from your credit history, although the history of your late payments will remain on your credit report. Collection of payment through wage garnishment will stop, and you will regain eligibility for federal student loan benefits.

Check Out: Student Loan Rehabilitation: How to Qualify and Recover

Federal student loan consolidation

Another path out of federal loan default is through a Direct Consolidation loan, which allows you to replace one or more federal loans with a new one. There are two possible ways to be eligible for consolidation: You can either agree to an income-driven repayment (IDR) plan under your new Direct Consolidation loan, or you can make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.

Consolidation doesn’t remove the record of default from your credit history, but it does allow you to regain eligibility for federal student loan benefits.

Pay off the loan in full

Federal student loan borrowers can also get out of default by paying off the loan in full, though this is rarely an option for most borrowers.

Fresh Start

The Biden-Harris administration unveiled a new program, dubbed Fresh Start, to help federal loan borrowers in default. This one-time, temporary program is designed to help borrowers recover from the ongoing financial fallout of the COVID-19 pandemic.

The Fresh Start program offers several benefits to federal student loan borrowers in default:

Renewed access to federal student aid (which is normally closed to borrowers in default)
Relief from collections will continue after the end of the payment pause
Restored access to loan rehabilitation if you have already rehabilitated a loan before
Loans will be reported as “in repayment” to the credit bureaus rather than “in default.”

To sign up for the Fresh Start program, borrowers must contact the Department of Education’s Default Resolution Group.

Private student loan default

Unlike the Department of Education, private lenders don’t have standard procedures for getting out of default. Borrowers must contact their lenders to find out the best way to recover from a defaulted private loan.

No matter who your lender is, however, it’s always best to contact them (or their contracted loan servicer) as soon as you realize you may miss a payment. Your lender can help you figure out a way to avoid defaulting and offer you a path to recover.

Here are some example options offered by two of Credible’s partner lenders:

MEFA: If you are struggling to pay your private loan with MEFA, you may be eligible for relief options, such as a modified payment plan. The lender recommends borrowers in financial hardship contact the loan servicing provider, American Education Services (AES) by phone at (800) 233-0557 or via their website to offer you relief.

Sallie Mae: This lender recommends borrowers experiencing financial difficulty to get in touch to discuss options. You can chat with a customer service representative on Sallie Mae’s website or call (800) 472-5543 to find out what relief options are available.

Other types of aid

In addition to these default recovery options, there are additional avenues you can explore to help you bounce back from a student loan default. These include:

Federal Student Aid Information Center: This free service offered by the U.S. Department of Education offers guidance to federal student loan borrowers on signing up for IDR, Public Service Loan Forgiveness, and loan consolidation. The organization even has a default-specific customer service line.
Legal advice: If you have defaulted on a private student loan, the lender may try to sue you to garnish your wages. Hiring a lawyer who specializes in student loan default may help mitigate the situation and find a mutually agreeable resolution. You can search for a student loan lawyer via The National Association of Consumer Advocates.
Credit counseling: Meeting one-on-one with a credit counselor from a reputable counseling service can help you create a debt management plan and identify what repayment options will fit in your budget. The National Foundation for Credit Counseling (NFCC) is a non-profit counseling organization that charges clients on a sliding scale and operates nationwide.

What are the consequences?

The consequences of defaulting on your student loans are severe. They may include:

Damage to your credit: Even before your student loan enters default, your delinquent payments will affect your credit. Once your loan is marked as in default, it will further hurt your credit score and history.
Loan acceleration: In many cases, going into default means that your entire loan balance becomes due immediately.
Loss of benefits: Benefits like deferment and forbearance are only available to borrowers whose loans are in good standing.
Garnished wages: Federal loans in default can result in garnished tax refunds, federal payments, and even wages. Private loans may go into collections, which can also result in garnished wages, depending on the statute of limitations.
Lawsuits: Private lenders may sue you for the amount of your defaulted loan, plus their court costs, attorney fees, collection costs, and any other costs they incurred when you defaulted on your loan.

Check Out: What Happens When You Default on a Student Loan

Can I avoid default?

Here are the best practices for student loan borrowers to ensure they stay up-to-date on their repayment:

- Understand your loan terms: It can be easy to assume that repaying your loans is tomorrow’s problem, but make sure you read through your promissory note carefully before signing so you are clear on what will be required of you. If you don’t understand something, ask questions.
- Complete exit counseling: Federal loans require students who are graduating, leaving school, or dropping to less than half-time enrollment, to complete exit counseling. This requirement may seem like a mere formality, but it is an important opportunity for you to learn and record information you will need, such as your loan servicer contact information, the type of loan you have, your repayment schedule, and the amount you have borrowed.
- Track your loans online: If you have federal loans, you can track information about all of them at StudentAid.gov. If you have private loans, make sure you know the login portal for your lender or lenders.

Keep records of your loans: Keeping a file of important documentation can ensure you don’t lose track of any loans, payments, or other information. You’ll need to keep records of the amount borrowed, student loan account numbers, lender contact information, payment schedules, your monthly payments, and any other paperwork from your lender.

Contact your lender if anything changes: Alert your lender if your name, address, contact information, or financial situation changes. Your lender must always be able to reach you, and letting your lender know when you are struggling to repay your loan will allow you to work together to create a repayment plan that fits your changed financial circumstances.

Can I refinance student loans in default?

It’s possible to refinance defaulted student loans. When you refinance a loan, you take out a new loan to pay off the previous loan(s). Refinancing often means reducing your interest rate, monthly payment, or the overall cost of the loan.

However, it may be difficult to qualify for a refinance loan if you have student loans in default, since the default will be reflected in your credit. Applying for a refinancing loan with a creditworthy cosigner may improve your chances of qualifying or even help you get a better rate.

By visiting Credible, you can learn more about student loan refinancing and compare rates from multiple private student loan lenders.

Lender	Variable rates from (APR)	Fixed rates from (APR)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	4.79%+	4.4%+
Fixed APR: 4.4%+ Variable APR: 4.79%+ Min. credit score: 720 Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: 720 Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 – $149,000 Max. Graduate Loan Balance: $200,000 – $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	6.26%+¹	5.39%+¹
Fixed APR: 5.39%+¹ Variable APR: 6.26%+¹ Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	5.99%+²	5.99%+²
Fixed APR: 5.99%+² Variable APR: 5.99%+² Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	7.41%+⁵	7.41%+⁵
Fixed APR: 7.41%+⁵ Variable APR: 7.52%+⁵ Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 36 months Loan servicer: Granite State Management & Resources (GSM&R) Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	4.78%+³	5.08%+³
Fixed APR: 5.08%+³ Variable APR: 4.78%+³ Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	6.61%+⁴	5.61%+⁴
Fixed APR: 5.61%+⁴ Variable APR: 6.61%+⁴ Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee, returned payment fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	4.89%+	4.49%+
Fixed APR: 4.49%+ Variable APR: 4.89%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	N/A	5.5%+
Fixed APR: 5.5%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	5.34%+ – 10.29%+⁸	7.06%+ – 13.72%+⁸
Fixed APR: 5.34%+ – 10.29%+⁸ Variable APR: 7.06%+ – 13.72%+⁸ Min. credit score: Mid-to-high 600’s FICO⁸ Loan amount: $5,000 to $500,000 (depending on degree) Loan terms (years): Multiple options Time to fund: 3 business days Repayment options: Immediate Fees: Late fee, NSF fee Discounts: Autopay⁸ Eligibility: Must be a U.S. citizen or have permanent residency status with a valid U.S. Social Security number Customer service: Email, phone Soft credit check: Yes⁸ Cosigner release: After 24 months⁸ Loan servicer: Firstmark Services Max. undergraduate loan balance: $125,000 Max. graduate loan balance: $500,000 Offers Parent PLUS loans: Yes Min. income: You or your cosigner must meet Nelnet Bank’s income criteria
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	N/A	5.79%+
Fixed APR: 5.79%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 – $249,000 Max. Graduate Loan Balance: $200,000 – $249,000 Offers Parent PLUS Refinancing: Yes
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All APRs reflect autopay and loyalty discounts where available \| ¹Citizens Disclosures \| ²College Ave Disclosures \| ⁵EDvestinU Disclosures \| ³ ELFI Disclosures \| ⁴INvestEd Disclosures \| ⁷ISL Education Lending Disclosures \| ⁸Nelnet Bank Disclosures

About the author

Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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