Most students pay a substantial amount toward their student loans. This can be overwhelming if the student is struggling to make ends meet. According to the Education Department, 9.7% of all student borrowers default on their loans. If you are among the ones that have defaulted on the loans, there are a few ways you can get out of debt or at least stop the penalties so that you are able to pay comfortably.

When are You Regarded to Have Defaulted on a Student Loan?

A default means you have not made payment as you had agreed when making a contract with the lender. You also have not made the payments for a considerable amount of time. If you miss a single payment, your loan will be declared delinquent, and you will be charged some late fees.

After 90 days without making any payment, the lender will report the delinquent loan to the credit bureaus. It will now appear on your credit report and hurt your credit score. After 270 days without any payments, the loan will be declared in default and may go to collections. This may vary with the lender. For example, Federal Perkins loans may default immediately when the payment is due.

If you have taken a private student loan, it will go into default if you have missed three payments. Check the promissory note for default timelines for your student loan.

What are the Effects of Defaulting on a Student Loan?

  • The lender may take money from you. The funds may include tax refunds, social security checks, or withholding on your tax refunds. Private lenders cannot take this money but may garnish your wages.
  • You continue to accumulate more debt due to penalties and interest. You could also be charged loan collection fees.
  • Defaults damage your credit score and can remain on your report for seven years. Low scores can make it hard to borrow assets or money.
  • You can be sued by the lender for failing to pay your debts. The court may order you to pay specific amounts each month and impose other penalties.

What to Do with a Student Loan Default

You can recover from a defaulted student loan in several ways, as discussed below:


When you default on a loan, the full amount you owe becomes due immediately. Therefore, if you can afford it, pay off the loan and do away with the debt. Some lenders give you a chance to renegotiate the payment for the defaulted month so that you can continue paying the premiums. However, do not expect much.

Avoid taking a personal loan to pay your student loan. A personal loan likely will have a higher interest rate than your student loan and may put you in a bigger debt crisis. Reach out to the lender and see if they can restructure your debt.


Rehabilitation is your best option if you cannot pay off your entire loan in one payment. This removes the default tag from your loan, but your late payments will still show in the report. To rehabilitate your loans, you will be paying at least about 15% of your income each month. You must also commit to clearing the arrears within a specified period.

You only have one option for rehabilitating your loan. If you choose this option, ensure that you can afford the payments after rehabilitating the loan because the option will be off the table.


As the name suggests, consolidation involves paying several months’ rent in a single payment. If you can afford it, it is the simplest way to get out of a loan. You can agree to repay the loan using an income-driven repayment plan or make three consecutive monthly repayments of the defaulted loans before asking the lender to consolidate it.

Remember, consolidation does not remove the record of default from your credit history, and you may not have many repayment plans. However, just like loan rehabilitation, you are eligible for additional federal student aid as well as repayment programs that take on loan forgiveness, deferment, and forbearance.

The Education Department announced a new program dubbed ‘Fresh Star’ that helps students get out of default. The program will come into effect after the end of the payment pause in 2023. Contact the Education Department for more details.

If you are sued for a loan default, the Lake County law firm of Johnston Tomei Lenczycki & Goldberg, LLC, can help represent you in court. We can help protect your rights and come up with a workable repayment plan. Contact us today for a consultation.




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