3 Ways to Get Your Loan Out of Default

You didn’t pay your federal student loan for several months, and now a collection agency is calling you telling you your loan has defaulted. If you’re like many borrowers in this situation, you are probably freaked out and don’t know what to do.


Don’t worry — you still have options to remedy your situation. You don’t have to run from your debt; you can face it head-on and we can help you.

When you default on a federal student loan, you have three basic options to get your loan back in good standing:

  1. Loan Repayment: You can repay your defaulted loan, but just know that your lender will ask for the full amount. When you default, the entire balance of the loan is due immediately. If you are able, you can pay by check, money order, or credit or debit card. Get more info on where to send your payment. If this isn’t an option for you, keep reading.
  2. Loan Rehabilitation: You can rehabilitate your loan by voluntarily making at least nine payments of an agreed-upon amount over a 10-month period. You can choose your due date, and your payment has to arrive at the Department payment center within 20 days of that due date. You and the Department of Education must work together to agree on a reasonable and affordable payment plan. After you’ve successfully rehabilitated your loan, you may regain eligibility for benefits such as choice of repayment plan, loan forgiveness, deferment, and forbearance. However, it is possible that your monthly payment could increase after you make those initial nine payments due to the additional collection costs that are added to your principal balance.
  3. Loan Consolidation: You may be able to combine all of your federal student loans, including defaulted loans, into a new Direct Consolidation Loan. Usually, you are required to make at least three consecutive, voluntary, and on-time payments on your defaulted loans prior to consolidating. Please note that the principal balance of your new Direct Consolidation Loan may include accrued interest and collection fees. There is also an option to consolidate without making any payments; however, you must agree to one of our income-driven repayment plans as part of this consolidation, and you are required to complete income verification documents. Learn about your options for consolidating.

Now that you understand your options, it’s time to take action. First, contact the agency that is billing you to explain your situation, ask for more information on your options, and let them know that you want to work out a plan to get your loan back on track. In no time, you will be out of default and your loan will be back in good standing.

Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.


  1. A better alternative is make higher education free for students, like almost every other industrialized country on earth.

    This is a much better alternative than having to repay fraudulent service providers such as NelNet that abuse tax payers to increase profits.

  2. One thing I don’t quite comprehend is why we allow someone to borrow even more after a income based repayment consolidation. If they had trouble paying what they already had, why would we let someone add even more debt to the pile?

    This seems like it encourages borrowing the maximum.

  3. I really need to know how can make arrangements on getting my loans consolidated..im getting bills from so many different collection agencies.. I don’t know what to do.. and I also want to know what I can do so IRS wont take all of my tax money this year… I do want to make arrangements and pay this off.. I just need to get a grip on this and find out exactly how much I do owe and make arrangements to pay it off… thank you

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