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Student Loans

If Your Loan Defaults

If your loan defaults (or is about to default), contact your loan servicer immediately and ask what options are available to you.

Failure to make payments on your student loan can have significant consequences.external link icon Your loan will be considered in defaultexternal link icon 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 Loanexternal link icon

Rehabilitationexternal link icon

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 Consolidationexternal link icon

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.

Possible Options if You Have a Private Student Loanexternal link icon

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.