How To Resolve Defaulted Student Loans

Last Updated on January 15, 2023

Here’s how to resolve defaulted student loans.

If you’re reading this, chances are you’re worried about your defaulted student loans. After all, the last thing anyone wants is to have their credit score tanked by a past mistake—especially when that mistake is due to an oversight on the lender’s part.

But don’t worry! We’ve got some tips for you so that you can resolve defaulted student loans and get back on track with your financial future.

How To Resolve Defaulted Student Loans

Staying Out of Default

There are a number of things you can do to keep yourself on track and out of default:

1. Enroll in an income-driven repayment plan.

If you haven’t already, you should consider enrolling in an income-driven repayment plan. Learn more about income-driven plans.

2. Consider setting up automatic payments.

Sign up for automatic debit through your loan servicer, and monthly payments will automatically be made from your bank account. You may also get a 0.25% interest rate deduction just for enrolling.

3. Track your loans online.

Log in to “My Federal Student Aid” to find information about all of your federal student loans.

4. Keep good records.

It’s helpful to keep important documents such as records of monthly payments, payment schedules, and notes about phone calls to your loan servicer in an organized file.

5. Stay in touch with your loan servicer.

As soon as you think that you’ll have trouble making your monthly payment, contact your loan servicer to discuss your situation—they are there to help you. Additionally, if you enrolled in an income-driven repayment plan, your loan servicer will let you know when it’s time to recertify your income and family size.

defaulted student loans meaning

What happens if I default on a federal student loan?

If your loan holder is unable to obtain payment from you for 270 days, they will take steps to place the loan in default and attempt to collect on the loan.The CFPB’s Debt Collection Rule clarifying certain provisions of the Fair Debt Collection Practices Act (FDCPA) became effective on November 30, 2021.

  • Learn more about the Debt Collection Rule and your debt collection rights.

Default is the failure to repay a loan according to the terms agreed to in the promissory note. For most federal student loans, you will default if you have not made a payment in more than 270 days.

If you haven’t made a payment on your federal student loan for 270 days (nine months), and you have not made arrangements with your lender or servicer that do not obligate you to make those payments (like deferment or forbearance), you are probably in default.

During the months in which you have failed to make payments on your federal student loans, your servicer must exercise “due diligence” in attempting to collect the loan – your servicer must make repeated efforts to locate and contact you about repayment.

If you have not received a letter from your servicer and you believe you may be in default, contact your servicer immediately. Ask about repayment options and find out if it is possible for you to avoid default.

Once your federal student loan goes into default, you could face a number of consequences:

  • Your wages may be garnished without a court order
  • You can lose out on your tax refund or Social Security check (funds would be applied toward your defaulted student loan)
  • Credit reporting agencies will be notified, and your credit score may suffer

You may not receive any additional federal student aid if you are in default on any federal student loan until you have taken steps to bring your federal student loan out of default. The Department of Education’s Going Back to School guide  has more information on this topic.

If you are behind on your federal student loan payments and being contacted by a debt collector, you may be able to arrange repayment options to get out of default.

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