If you have federal student loans in default due to a life change, unemployment, difficulty making payments or any other reason, there is hope for getting your student loans out of default for good.
According to the Consumer Federation of America (CFA), millions of former U.S. college students are currently in default on student loans, meaning they have not made a payment for at least nine months.
If you’re in this situation, you’re certainly not alone. But before it has an even bigger impact on your credit, you should know how to fix your defaulted student loans and 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 will typically go into default unless other repayment arrangements have been made with your loan servicer. Unfortunately, missing monthly student loan payments can have an immediate impact on your credit, even before default, so it’s essential to get these loans back on track as soon as possible.
Beyond damaging your credit, defaulting on student loans can add numerous other expenses and undesirable outcomes. However, you may be able to access a few options that can fix the situation.
Find out if you can get your student loans out of default for free.
Student Loan Consolidation
Some student loans are eligible for student loan consolidation, where you take one or more of your loans and combine them into a single student loan – and a single 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.
If you’re in default, consolidating your student loans into a new repayment plan can be helpful in a few ways if your servicer agrees to let the consolidation take place. 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.
Explore the requirements for student loan consolidation.
Student Loan Rehabilitation
Student loan rehabilitation involves contacting your loan servicer directly to set up a new student loan repayment agreement that is both “reasonable and affordable”.
Typically, no matter what agreement is made between you and your lender, your loans won’t be 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 open your new loan or loans up to new opportunities for other repayment plans that can drive your interest down further or make payments more manageable.
Explore the requirements for student loan rehabilitation.
Student Loan Cancellation
While not many borrowers are eligible for student loan cancellation, particularly if loans are currently in default, there are some ways you can have your loans forgiven under the right circumstances.
Here are a few ways you can have the amount you owe on student loans cancelled:
- The institution closed during enrollment or 120 days after you withdrew
- The institution falsely certified your eligibility for federal student aid
- A permanent disability prevents you from loan repayment
- The original borrower has passed away
- You work in a qualifying profession for loan forgiveness
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 one-time payment.
For more details on getting out of default, speak with student loan specialist by phone at 800-771-6358.