Help For Student Loans In Default

Last Updated on January 19, 2023

As a student, it’s easy to get overwhelmed by the idea of paying back your student loans.

It’s even more difficult when you’re in default on the loans. That’s why we’ve put together this blog post on how to get your student loans out of default and back on track so you can start enjoying life again!

First Things First: What Is Default?

Defaulting on your student loan means that you’ve failed to make at least one payment for 270 days. This will be reported to credit reporting agencies, which will negatively affect your credit score. Once your loan is in default, it becomes much harder to pay off your loan or even get into a repayment plan with your lender. The only way out is through rehabilitation or consolidation—but both require action from you!

Rehabilitation: What It Is and How To Do It

The first step toward getting out of default is rehabilitating the defaulted loan. Rehabilitation involves making nine consecutive on-time payments within 20 days of each other. These payments must also be at least $5 more than the monthly minimum payment required before entering default (the exact amount depends on when you entered default). These payments cannot be made using an income-based repayment plan or an income-cont

How To Get Student Loans Out Of Default - US Student Loan Center

Help For Defaulted Student Loans

You have multiple options to get out of default.

If you failed to make your payments on your federal student loan and now are in default, don’t let the consequences of default affect your financial future. Find out how to get out of default.

One way to get out of default is to repay the defaulted loan in full, but that’s not a practical option for most borrowers. The two main ways to get out of default are loan rehabilitation and loan consolidation. While loan rehabilitation takes several months to complete, you can quickly apply for loan consolidation. However, loan rehabilitation provides certain benefits that are not available through loan consolidation. Take a look at the chart below to compare the benefits of loan rehabilitation versus the benefits of loan consolidation.

student loan rehabilitation cares act

The CARES Act allows borrowers to use student loan rehabilitation to dig out of default and not make payments until September 2022. If you still have defaulted federal student loans, start the rehabilitation program before the relief ends.

When the pause on student-loan payments ends, the U.S. Department of Education will restart collection efforts for 8 million borrowers in default. Those Americans will be subject to wage garnishment, tax refund withholding, and Social Security seizure when that happens. Democratic lawmakers urge the federal government to prevent that outcome by automatically removing the default status. But, as is true with blanket student loan forgiveness, that has yet to happen. Ultimately, the responsibility to get out of default rests with you.

Read on to learn how to use student loan rehabilitation to get out of default before the CARES Act benefits end.

***The Education Department announced the payment pause would be extended until August 31, 2022. The department added that it would grant more than 7 million borrowers in default a “fresh start” and automatically return their accounts to good standing before the freeze ends. There’s no word yet on when this change will happen.

Student loan rehabilitation is a one-shot program to get federal student loans out of default. Rehabilitation requires borrowers to make nine on-time payments — within 20 days of the due date — over 10 months. However, the CARES Act allows borrowers to skip those monthly payments and get credit for the nine required payments.

Lenders of private loans don’t offer rehabilitation as an option for loans that have defaulted. Here are some options to explore if you have charged-off private student loan debt.

Borrowers who signed the loan rehabilitation agreement before May 2021 should not have to make a payment to complete the program. The suspended payments count for the nine on-time payments.

You can check your payment status by contacting the Department of Education’s Default Resolution Group at 800-621-3115 or by checking MyEdDebt.

About the author

The Editorial Team at Infolearners.com is dedicated to providing the best information on learning. From attaining a certificate in marketing to earning an MBA, we have all you need. If you feel lost, reach out to an admission officer.
Study on Scholarship Today -- Check your eligibility for up to 100% scholarship.

Leave a Comment