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In Default on a Federal Student Loan? Here Are Your 3 Paths Back to Good Standing
A defaulted federal student loan has three main paths back to good standing: rehabilitation, consolidation, or payment in full. Each path is free to start through the U.S. Department of Education or the group that holds the loan.
Do not pay a private company to enroll you. First check the loan type and holder on StudentAid.gov and MyEdDebt.ed.gov.
Take this one step at a time. Find the loan. Check who owns it. Ask for all three paths in print. Then pick the path you can finish. A fast choice is not best if the new bill will not fit your pay.
You can ask for help, take notes, and call back. You do not have to choose on the first call.
When does a federal loan go into default?
Most federal student loans go into default after at least 270 days without a required payment. After more than 360 days, involuntary collection may begin if you do not act.
The government may take a tax refund, part of some federal benefits, or up to 15% of disposable pay. It must send a notice first. A Treasury offset notice gives a 65-day action window. A wage notice gives 30 days to seek a plan or hearing.
If the balance, loan, or default is wrong, use the hearing steps in the notice. Save the envelope because the notice date matters.
How does loan rehabilitation work?
Rehabilitation uses a signed plan and nine on-time monthly payments made within ten months. The payment is based on income. In some cases it may be as low as $5.
After the ninth payment, the loan leaves default. The Education Department asks credit bureaus to remove the default record. Older late payments may remain.
Rehabilitation takes time. Collection may continue until the loan leaves default or you make at least five rehab payments. You can normally use rehabilitation only once for a loan under the current rule.
How does consolidation work?
Consolidation puts one or more federal loans into a new Direct Consolidation Loan. It is often faster than rehab.
To consolidate a defaulted loan, you generally agree to use an allowed income-based plan or first make three voluntary, on-time, full monthly payments. Current plan choices depend on the loan and date. Use the plan list shown on StudentAid.gov, not an old blog post.
Consolidation ends the default, but the old default record may remain on your credit history. It may also change interest, time, and benefits. Read every choice before you submit.
What does paying in full do?
Paying the full amount ends the debt and default. It is the fastest path, but few people can afford it.
Ask for a current payoff statement before sending money. Use the official holder named in your account. Do not wire money to a caller who reached you first.
Which path may fit you?
Rehabilitation may fit if removing the default mark matters and you can complete nine months. Consolidation may fit if you need a faster return to good standing and accept the credit-history tradeoff. Full payment may fit if you can pay without losing rent, food, health care, or emergency savings.
None of these choices should require a private enrollment fee. A real federal form is free.
Where do you start?
- Sign in at StudentAid.gov and open “My Aid.”
- Find each loan in default and note who holds it.
- For an Education Department loan, use MyEdDebt.ed.gov.
- For some FFEL loans, call the guaranty agency shown in your record.
- Ask for written rehab, consolidation, and payoff facts.
- Keep every notice and payment receipt.
After the default is fixed, use the official Loan Simulator to pick a plan you can keep. Our federal loan-forgiveness guide covers real relief paths after you know your loan status.
How do you spot a default-help scam?
- It asks for your StudentAid.gov password.
- It charges an enrollment or monthly care fee.
- It promises to remove every loan or credit mark.
- It tells you to pay a new account before you verify the holder.
- It says a federal offer ends today.
The Default Resolution Group does not charge a service fee. The money it requests is tied to your loan plan, not a private membership.