Getting out of federal student loan default
When you default on your federal student loans, a lot of bad things can happen to you. For instance:
- You’re no longer eligible for federal student aid;
- You’re no longer eligible for deferment, forbearance, or income-driven repayment plans;
- Your tax refund can be taken;
- Your paycheck can be garnished;
- Your Social Security income and other federal benefits can be taken; and
- You can be sued.
There are two main programs to get out of default for your federal student loans: consolidation and rehabilitation. Consolidation will get you of default quicker. You’ll usually be out of default a few weeks after you apply to consolidate your federal student loans. Rehabilitation, on the other hand, takes about 9 to 10 months to get out of default.
Before deciding to consolidate or rehab your student loans, check to see if you can get your loan cancelled or if you have enough money to settle your student loan debt.
But if consolidating or rehabilitating your student loans is what you have to do, know that there are limits on how many times you can consolidate: you only have one time per loan to get out of defaulting by consolidation or rehabilitation.
Learn more about consolidating and rehabilitating your federal student loans
Summary of consolidation and rehabilitation
Getting out of private student loan default
Getting out of default on private student loans is different than getting out of default for federal loans. Although some lenders may have a get out of default program, most don’t because they’re not required to.
Contact your private student loan lender to see if it offers this type of program. And if it does, ask what the requirements for the program are and whether the lender will remove the default from your credit report after you complete the program.
You want to act quickly if you default on your private student loans. Most private lenders charge off loans after 120 days of missed payments. Your lender is less willing to work with you to help you get out of default after it has charged off the loan.
Your private student lender has less powers to collect on your defaulted student loan. Typically, your lender will rely on suing you to get a judgment against you so it can garnish your wages or place a lien on your home or other real property.