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If you miss a payment on a student loan, your loan will be considered delinquent. After missing payments for a certain period of time — 270 days for most federal student loans and 120 days for most private student loans — your loan will enter default. Not only can defaulting damage your credit, but it could also result in losing access to financial aid that you need to afford additional classes. The good news is that there are a few options that could help you get out of default and regain eligibility for financial aid. If you’re wondering how to go back to school with defaulted student loans, here’s what you should know:
What are my options if I want to go back to school with defaulted student loans?If you have student loans in default, it could be difficult to go back to school — especially if you’ve defaulted on federal loans, as this could make you ineligible for any more federal aid. But if you can get your loans out of default, you could regain access to financial aid as well as other federal benefits, such as income-driven repayment (IDR) plans and student loan forgiveness programs. Here are a few potential ways to get your student loans out of default: 1. Rehabilitate your defaulted student loansStudent loan rehabilitation is one option to get a federal student loan out of default. To rehabilitate a student loan, you’ll have to agree to make payments for nine to 10 months, depending on the type of loan you have. If you successfully complete rehabilitation, the default status will be removed from your loan as well as your credit report, which could be helpful as you begin rebuilding your credit. Pros
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Keep in mind: Unfortunately, most private student loan lenders don’t offer rehabilitation as an option for defaulted loans. If you have private loans in default, be sure to check with your lender to see what assistance might be available to you. Learn More: Defaulted Student Loans: Can You Refinance? 2. Consolidate your student loansAnother way to get a federal student loan out of default is by consolidating it into a Direct Consolidation Loan. While this won’t change your interest rate, you might be able to extend your repayment term up to 30 years, which could greatly reduce your monthly payments. Keep in mind that before you can consolidate a defaulted loan, you must either make three full monthly payments or agree to repay the consolidated loan on an IDR plan. Also note that if you have a defaulted Direct Consolidation Loan, you must have at least one other loan to include in the consolidation. Pros
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Keep in mind: Another way to get your loans out of default is to repay them in full. However, most borrowers can’t afford to do this, so rehabilitation or consolidation are often better options. What if I can’t make the student loan payments after a loan consolidation?If you’re struggling to make payments on a federal consolidation loan, here are a few options to consider:
Check Out: Student Loan Rehabilitation vs. Consolidation: Getting Out of Default 3. Negotiate a student loan debt settlementNegotiating a debt settlement could be another way to resolve your student loan default. A debt settlement is when you negotiate with the loan holder to pay a lump sum in order to clear your debt. In some cases, the loan holder could be willing to accept a lower amount than what you owe and might even waive collection fees. Keep in mind that your loan holder might not agree to a settlement — especially if they have other means to collect payments, such as wage garnishment. Additionally, it could be difficult to come up with a lump sum to offer. However, it might be worth asking if you can afford to do so. Pros
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Learn More: Here’s How Many People Default on Their Student Loans in the U.S. How to negotiate a settlementIf debt settlement seems like the right fit for your needs, follow these four steps:
Tip: If negotiating with a loan holder or debt collector on your own is too overwhelming, consider asking for help from an attorney experienced in debt settlement or from a reputable debt settlement company. Just remember that this will likely come with fees that you’ll have to pay on top of your settlement. How to go back to school after defaulting on student loansAfter resolving a student loan default, you could regain your eligibility for further federal financial aid and return to school. If you’re ready to go back to school and need help paying for it, follow these four steps:
Tip: If you’re struggling to get approved for a private student loan due to bad credit, consider applying with a creditworthy cosigner to improve your chances. Even if you don’t need a cosigner to qualify, having one could get you a lower interest rate than you’d get on your own. If you decide to take out a private student loan, be sure to consider as many lenders as possible to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes. Compare student loan rates from top lenders
See Your Rates Trustpilot About the author Taylor Medine Taylor Medine is a Credible authority on personal finance. Her work has been featured on Bankrate, Experian, The Balance, Business Insider, Credit Karma, and more. She’s also the author of The 60-Minute Money Plan, a self-published intro to budgeting guide for people who hate budgeting. Can student loans in default be forgiven?Defaulted loans are not eligible for any of our student loan forgiveness programs. But if you take advantage of Fresh Start, you'll get out of default status. Then you'll regain the ability to apply for forgiveness programs, including Public Service Loan Forgiveness.
How do I get rid of default on student loans?In order to consolidate a loan in default, you have two payment options: agree to repay the new loan under an income-driven repayment plan or make three consecutive, on-time monthly payments on the defaulted loan before consolidating.
How long does it take for a student loan to get out of default?Rehabilitating Your Federal Student Loans to Get Out of Default. To rehabilitate a defaulted student loan, you must make nine payments within 20 days of the due date over the course of ten months.
What happens when student loans default?Consequences of Default
The entire unpaid balance of your loan and any interest you owe becomes immediately due (this is called "acceleration"). You can no longer receive deferment or forbearance, and you lose eligibility for other benefits, such as the ability to choose a repayment plan.
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