Last Updated on January 19, 2023
How to Pay Student Loans in Default
Student loans can be a real headache. If you find yourself in default, it’s important to know your options. Here’s how to get back on track with your student loan payments and avoid defaulting again.
If you are past due on your student loans, you may be worried about the consequences of defaulting. Fortunately, there are a few things you can do to get out of default and back on track with your student loan payments.
How to Pay Student Loans in Default: What Happens When I’m in Default?
When you’re past due on your student loans, it’s important to understand what happens when you’re in default and what options are available to get out of default. Here’s what happens when student loans go into default:
Your credit score will drop significantly; many lenders require a minimum score of 620 or higher for approved credit cards and mortgages but lenders may not approve new lines of credit at all once your score is below 620—and that can be problematic if you need access to additional credit lines for emergencies or other purposes.
You’ll have difficulty getting new lines of credit because most lenders report negative information about delinquent accounts with them directly from the federal government (known as “credit reporting agencies”) so
How To Pay Student Loans In Default
Options for Getting Out of Default
You have three options for getting out of default: loan rehabilitation, loan consolidation, or repayment in full.
1. Loan Rehabilitation
To rehabilitate most defaulted federal student loans, you must sign an agreement to make a series of nine monthly payments over a period of 10 consecutive months. The monthly payment amount you’ll be offered will be based on your income, so it should be affordable. In fact, your monthly payment under a loan rehabilitation agreement could be as low as $5! Each payment must be made within 20 days of the due date.
Get more information about loan rehabilitation.
Note: You can rehabilitate a defaulted loan only once.
2. Loan Consolidation
Loan consolidation allows you to pay off your defaulted federal student loans by consolidating (combining) your loans into a new Direct Consolidation Loan.
To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either
- agree to repay the new Direct Consolidation Loan under an income-driven repayment plan or
- make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.
Learn about which repayment plans will be available to you, and get additional information about loan consolidation.
3. Repayment in full
Repayment in full is exactly as it sounds; you can repay the full amount that you owe at any time.
We understand that repayment in full is not a viable option for most people. If that’s the case, you should focus on deciding between loan rehabilitation and loan consolidation.
Comparing the Benefits You Regain After Rehabilitation and Consolidation
Now that you have a better understanding of what rehabilitation and consolidation are, you can determine which option is best for you. Once your loan has successfully been removed from default, you will regain eligibility for certain benefits, depending on whether you chose rehabilitation or consolidation.
| Loan Rehabilitation | Loan Consolidation | |
| Regained eligibility for deferment, forbearance, and loan forgiveness | Yes | Yes |
| Regained eligibility for additional federal student aid | Yes | Yes |
| Choice of repayment plans | Yes | Yes (but there may be limitations—see below**) |
| Removal of the record of default from your credit history | Yes (but see below*) | No |
*If you rehabilitate a defaulted loan, the record of the default will be removed from your credit history. However, your credit history will still show late payments that were reported by your loan holder before the loan went into default. If you consolidate a defaulted loan, the record of the default (as well as late payments reported before the loan went into default) will remain in your credit history.
**Unless you make three voluntary, on-time, full monthly payments on a defaulted loan before you consolidate it, your choice of repayment plans for the new Direct Consolidation Loan will be limited to one of the income-driven repayment plans. If you make three voluntary, on-time, full monthly payments before consolidating, you can choose from any of the repayment plans available to Direct Consolidation Loan borrowers.
student loan default number
Manage and Repay Student Loans
- Repay a Student Loan
- Resolve Student Loan Disputes
- Unable to Repay Student Loans
Repay a Student Loan
Whether you’re still in school or you’ve already graduated, it’s important to start planning how you’ll repay your loan. To ensure your payments are manageable, find out about selecting repayment plans. Or, learn how to contact your loan originator to address any questions you may have.
- Get Financially Settled When You Leave School
- Make Payments After Your Grace Period
- Select a Repayment Plan for Your Federal Student Loans
- Contact Your Student Loan Originator
Resolve Student Loan Disputes
If you and your loan servicer disagree about the balance or status of your loan, follow these steps to resolve your disputes:
1. Talk with your loan servicer
You may be able to solve a dispute by simply contacting your loan servicer and discussing the issue. Get tips on working through an issue with your loan servicer to resolve the dispute.
2. Request help from the FSA Ombudsman Group
If you have followed the guide and still cannot resolve your issue, as a last resort, contact the Federal Student Aid (FSA) Ombudsman Group. The FSA Ombudsman works with student loan borrowers to informally resolve loan disputes and problems.
Unable to Repay Student Loans
If you can’t pay the full amount due on time or have to miss a student loan payment, your loan may be considered delinquent and you may be charged late fees. Contact your loan servicer immediately for help, and ask them about your options.
