How to recover from student loan default

Tips for student loan default

Falling into student loan default can be overwhelming, but there are ways to recover. With the right steps, you can get out of default, protect your finances, and start rebuilding your credit. Here’s how to get back on track.

1. Keep track of all your loans

Be sure to check the status of your federal student loans at studentaid.gov. You can find out who your servicer is, view all your loans, and see if any of them are in default.

Make sure federal student loan payment pauses, like deferment and forbearance. If there are any errors, contact the loan servicer for that loan. If you are in default, contact the guaranty agency that administers your loan and collects from borrowers.

To check on the status of your private student loans, log in to your account on the lender’s website.

2. Consider loan rehabilitation

Loan rehabilitation is one way of getting your federal student loans out of default. You can work with your loan servicer and make a set number of on-time, monthly payments under a rehabilitation agreement. Then you can get on a regular income-driven repayment plan, or any other plan you choose. At this point, the default can be removed from your credit report. However, it will still show late payments that were reported by your servicer before the loan went into default.

3. Review your credit reports

You’re allowed three free credit reports annually—one from Equifax, one from Experian, and one from TransUnion. These reports list all of your loans and debt, whether you have federal student loans, private student loans, or both. This is a good time to not only check on the status of your loans, but to make sure everything on your report is accurate. If you are cleared from a federal student loan default, you’ll need to check your report to make sure the default did drop off your credit report about 60 days later.

Bottom line: Avoid default whenever you can

If you’re having trouble making loan payments, contact your loan servicer immediately and discuss options with them so you can avoid going into default.

If any loans should go into default, don’t hide from them. Ask about repayment plan possibilities and keep checking to make sure that any defaults come off your credit reports as soon as possible.