Student Loans

If Your Loan Defaults

Failure to make payments on your student loan can have significant consequences. Your loan will be considered in default if you do not make any payments for a set period. This amount of time may be as much as 270 days for most federal student loans, but is much shorter for private loans.

Possible Options if You Have a Federal Student Loan

Rehabilitation

To rehabilitate a defaulted federal loan, you must agree in writing to make a certain number of payments (often nine monthly payments) within 20 days of the due date. Under a loan rehabilitation agreement for a federal loan, the Department of Education or the guaranty agency will initially offer you a payment that is equal to 15 percent of your discretionary income. You may be able to obtain a recalculated payment that considers your income and expenses if you find the initial monthly payment is unaffordable. You can rehabilitate a defaulted federal loan only once.

Loan Consolidation

Another option to get your federal loan out of default is to consolidate your defaulted federal student loan into a Direct Consolidation Loan. Loan consolidation allows you combine one or more federal student loans into a single new loan with a fixed interest rate. Before you can consolidate a defaulted loan, you must make three consecutive, on-time, full monthly payments on the defaulted loan or agree to an income-driven repayment plan for the new loan.

• The free Federal Direct Consolidation Loan Application and Promissory Note may be completed either online or on paper. To complete the online application or to download a paper application, go to studentaid.gov/app/launchConsolidation.action
• You may contact the Loan Consolidation Information Call Center at (800) 557-7392 for questions you may have before applying to consolidate your federal student loans.
• There is no cost to the borrower to complete the Federal Direct Consolidation Loan Application and Promissory Note.
• Beware of possible scams! If someone contacts you and offers to consolidate your loans for a fee, you are not dealing with a U.S. Department of Education consolidation servicer.
• For more information on loan consolidation, consult the loan consolidation programs section of this publication.

Possible Options if You Have a Private Student Loan

If you have non-federal loans, you cannot consolidate your private loans into a federal direct loan program. If your loans are in default, most private student loan lenders do not have rehabilitation or consolidation programs. You should ask your lender or loan servicer about your options, if any, when your private loan has gone into default.

If Your Loan is Cosigned

For more information on defaulting on cosigned loans, see the publication Cosigning a Loan. If you are a cosigner and the main borrower defaults on the loan, the responsibility of repayment falls to the cosigner. The cosigner can also be responsible for late charges, penalties, and collection costs.