If you have federal student loans in default due to a life change, unemployment, difficulty making payments or any other reason, we can help you get your student loans out of default for good.
According to the Consumer Federation of America (CFA), millions of former and current U.S. college students are currently in default on student loans, meaning they haven’t made a payment for at least nine months.
If you’re in this situation, you’re not alone – but there are ways to fix it. Before your defaulted student loans have an even bigger impact on your credit, the experts at Loan Forgiveness are here to help you get back to a good place financially.
How to Get Out of Student Loan Default
When a student loan has not been paid for more than 270 days, it usually goes into default unless other repayment arrangements are made with your loan servicer. Unfortunately, missing monthly student loan payments can have an immediate impact on your credit, even before a default occurs, so it’s essential to get these loans back on track as soon as possible.
Explore options to fix your situation below or get in touch with our team for a free assessment and guidance on getting out of default.
Student Loan Consolidation
One great way to get out of default is to consolidate your federal student loans to a Direct Consolidation Loan. Even if you have more than one student loan currently in default, consolidation lets you combine these loans into a single student loan with one monthly payment.
One of the many reasons for consolidating federal student loan is simplifying the repayment process on multiple loans each month. With one loan payment being made, it’s often less stressful – and more affordable – for most borrowers to repay student loans.
Qualifying for a consolidation is easier than you might think. All you have to do to get accepted for a consolidation loan is choose one of these two options offered by the DOE:
- Agree to repay the new Direct Consolidation Loan under an income-driven repayment plan
- Make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it
Your loan servicer will determine how much you pay on your loan for the three consecutive payments after looking at your financial situation and what you can afford.
If you’re in default, consolidating your student loans into a new repayment plan can be helpful in a few ways. Not only can it put you back in good standing with your student loans, it can also make you eligible for other benefits, such as Public Service Loan Forgiveness (PSLF) and other student loan forgiveness programs.
Have private loans in default? Discover how to consolidate your private loans.
Student Loan Rehabilitation
Student loan rehabilitation is another option you have at your disposal if you want to get your loans out of default. To start the rehabilitation process, you’ll need to contact your loan servicer directly to set up a new student loan repayment agreement that is both “reasonable and affordable”.
Monthly payments under a student loan rehabilitation plan are determined by your discretionary income – or the amount you have left over after paying for necessary expenses. Where you live and your family size are also important factors to determining your discretionary income.
In most cases, your monthly payment will be 15 percent of your annual discretionary income divided over 12 months. If these payments are still unaffordable, you may be able to have them reduced by asking your servicer to offer an alternative monthly payment that’s better for your financial situation.
No matter what agreement is made between you and your lender, your loans usually won’t be considered fully rehabilitated until you make nine out of 10 on-time payments to the loan servicer under the new terms. But by doing so, you may be able to access other repayment plans that can drive your interest down further or make payments more manageable.
Student Loan Cancellation
While many borrowers aren’t eligible for a student loan cancellation, particularly if loans are currently in default, there are some ways you can have your loans cancelled under the right circumstances.
To have your student loans cancelled, you’ll first need to meet the requirements for cancellation. If you meet these requirements, you will need to apply for cancellation through your servicer, stating the reasons for the application and possibly providing documentation that proves you qualify.
Here are a few ways to have the amount you owe on student loans cancelled:
- The institution you attended closed during enrollment or 120 days after you withdrew
- The institution you attended falsely certified your eligibility for federal student aid
- You have a permanent disability that prevents you from repaying your loans
- The original borrower of the student loan(s) has passed away
- You have a Perkins Loan and work in a qualifying profession for loan forgiveness
Most loans qualify for cancellation if you’re eligible. However, a Perkins Loan Cancellation may be handled differently than other cancellation options, such as Direct Loans and FFEL Program Loans. Contact our experts for more information or to get the process started.
Student Loan Payoff
If you want to get in good standing with your loans immediately and you have the funds available, paying back the entire balance due on your student loans is another option. In this case, your lender will receive the full sum of your remaining balance and close out your loan completely after you make a full one-time payment.
For more details on getting out of default, speak with student loan specialist by phone at (800) 771-6358.