Help! I'm in Danger of Student Loan Default
Struggling to repay your student loans? You’re not the only one.
While the national student loan default rate has fallen from 11.8% in 2015 to 11.3%, according to the Washington Post, hundreds of thousands of borrowers are still failing to make payments.
Student loan default in a nutshell
Default happens when you’ve failed to repay your loan – and it can impact your financial well-being for the rest of your life.
After 270 days of not making a payment, your federal student loans will be in default. Private student loans are even less forgiving. Typically, most private loans go into default once you miss three monthly payments. You should always review the terms and conditions of your promissory note to ensure you understand how your lender or loan servicer will handle such situations.
What does this mean for people unable to repay their student loans? A lot. Because it’s incredibly rare for student loans to be discharged in bankruptcy (there’s a handful of cases on the books, but as a general rule, it doesn’t happen), defaulting on your student loans can plague you for years. Your credit will be damaged, your wages may be garnished, Social Security benefits and lottery winnings may also be reduced, and you may be ineligible to receive additional federal financial aid funds. You can even be sued.
There’s a host of consequences you may be hit with for not staying current on your student loan payments. Defaulting may also come back to haunt you when you try to buy a home or make other large purchases.
Nip student loan default in the bud
One of the best ways to avoid default is to be proactive. If you find you’re struggling, don’t give up! Explore your options. There are several things you can do to keep your head above water. Here are a few good places to start.
Find a repayment plan that works for you
If you’re consistently struggling to make your monthly payments, it’s time to take another look at your repayment plan.
Federal student loans have plenty of repayment plans to choose from, giving you anywhere from 10 to 30 years to repay your loan depending on how your payments are structured. Repayment options for private student loans vary by lender, but most range from 7 to 15 years, with some offering extended terms up to 30 years.
Switching to a more affordable plan could be the thing that keeps you out of default, so if your plan just isn’t cutting it, contact your lender or loan servicer ASAP to find a better fit.
Let’s talk consolidation and refinancing
If you need a long-term solution, consider consolidating or refinancing.
Consolidation bundles all of your existing loans into one, with only one monthly payment to keep track of. This can also reduce your payment by extending your repayment term. If you choose to refinance, you’re looking at a "two birds, one stone" approach where you not only lower your monthly payment (through an extended repayment term), but you can also potentially shave points off your interest rate. Consolidating or refinancing could be a way to not only stay out of default, but make your monthly payment more affordable.
Yes, you might spend more money in the long run, but is it worth it to stay out of default? Absolutely. You may have new life expenses creeping in, like childcare or home repairs, and consolidating or refinancing are viable options to help you manage your debt in a manner you can live with.
Lowering your payments can also free up money to put toward other, more expensive debt, like a high-interest credit card. Most refinancing and all federal loan consolidation options allow for early repayment without any penalties, so even if the term of your loan is extended, you may be able to pay more than what’s required to pay down your student debt faster as you get your finances in order and (fingers crossed!) you begin earning more money.
View My Student Loan Refinancing Options
What’s the real difference?
A Direct Consolidation Loan is available for federal education loans only. This program combines your existing federal education loans into one, with a weighted interest rate. If you go this route, you don’t have to consolidate all of your federal student loans. If you happen to have a federal student loan that is almost paid off, or has a really low interest rate, you don’t have to include it in the Direct Consolidation Loan.
Refinancing, on the other hand, allows you to take out a new private loan to pay off one or more existing loans, and you can include federal or private student loans, or both. When you refi private student loans, you can consolidate your debt, lower the cost of your monthly payment, and even get a better interest rate. If you decide to refinance your federal loans through a private lender, you’ll be sacrificing the deferment, forbearance, and other repayment programs the government education loans offer, but if you feel your income is steady and those low interest rates are calling to you, it’s an option worth exploring.
Again, eligibility requirements, interest rates, and repayment options will vary by lender, so do your research to find the best one for you.
Take a break
If you’re going through a tough time and know you won’t be able to make a payment for a few months (or more), see about getting a deferment or forbearance. Both will temporarily suspend or reduce your payments, giving you a chance to get back on your feet without risking default. (You may also want to look into income-driven repayment plans such as Income-Based Repayment.)
What is a deferment or forbearance?
A deferment is a temporary - key word here - suspension of your payments on a student loan. Most federal loans are eligible for deferment under certain conditions, like during periods of unemployment or being enrolled in school at least half-time.
If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans). So, even if you’re not making payments toward your principal loan balance, it may be worth it to pay interest as it accrues so you’re not overwhelmed when it’s added to your total balance after your break is over.
If you want to learn more about deferment and forbearance programs, check out Tackling Repayment: Deferment, Forbearance, and Other Options on our Resources page or visit Federal Student Aid to see if you’re eligible for deferment or forbearance.
Options for private student loans aren’t as crystal clear. Most private lenders or loan servicers give a deferment while you’re in school at least half-time, typically allowing you a grace period of a few months after you graduate before you’re required to begin making payments. Some offer forbearance or other periods of deferment for tough times, but it’s not guaranteed for all private loans.
We’ll say it again: options and requirements will vary, so when in doubt, contact your lender or loan servicer ASAP. (Even if they seem scary, it’s better to work with them than go into default!)
Wipe the slate clean
If your debt is swallowing you whole, don’t panic – you’re not out of luck yet.
Forgiveness and discharge programs are available to cancel out your federal education loan debt, either by earning it through service in a certain career path (forgiveness) or by being granted loan discharge by your lender or loan servicer.
Forgiveness is typically earned by working or volunteering in a specific career field, such as teaching, working for the government, or serving in the military.
Discharge is granted under certain circumstances, like having your school close, or becoming permanently disabled. Federal student loans offer various routes for loan forgiveness and discharge, but, unfortunately for non-federal borrowers, discharge options tend to be stricter, and there are no loan forgiveness options available for private student loans.
It can get tricky. Check out this article on discharge and forgiveness for more information.
It’s a trade-off
Paying off your student loans isn’t "one size fits all." For some, repayment may be as simple as locking in a standard repayment plan for the next X number of years. For others, it might be a little tougher – and that’s okay. Whether you need to change your repayment plan, consolidate your loans, or find another way to get back on solid ground, default doesn’t have to be the answer.
Ready to take the first step? Learn more about your eligibility to refinance your loans and see how much you can save with our student loan consolidation calculator.
Best Student Loan Refinance Lenders
College Ave Student Loans
- Variable rate range: 5.99% – 11.99% APR1
- Fixed rate range: 5.99% – 11.99% APR1
- No application or prepayment fees
- Apply in 3 minutes or less for instant credit decision
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
Information advertised valid as of 03/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
ELFI Student Loan Refinance
- Our customers have reported that they are saving an average of $278 every month or will see an average of $20,774 in total savings after refinancing their student loans with Education Loan Finance.1
- Variable and fixed rates starting from 5.28% APR and 5.08% APR2
- Prequalify in as little as two minutes
- Award winning customer service from your dedicated Student Loan Advisor who is matched to you from the moment you sign up
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 01/03/23 and 03/01/23. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
2Rates accurate as of 08/25/23. The interest rate and monthly payment for variable rate loans may increase after closing. Your actual interest rate may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10 year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $10,000 in qualified student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.
SoFi Student Loans
- Rates as low as 5.09% variable and 4.49% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
Splash Financial Refinance Loan
- Rates as low as 4.74%1 Variable APR and 4.96%1 Fixed APR
- No pre-payment penalties, origination, or application fees
- See rates in 3 minutes without affecting your credit score2
1The rates displayed may include a 0.25% autopay discount.
2To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Earnest Student Loan Refinancing
- Variable rates starting at 5.49% APR (including 0.25% Auto Pay discount)*
- Fixed rates starting at 4.96% APR (including 0.25% Auto Pay discount)*
- Choose your own monthly payment
- No fees of any kind and exceptional customer service for the life of your loan
- Check your rate in under 2 minutes
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.21% APR to 10.04% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.74% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
*Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. Not all borrowers will qualify for our lowest rates, and your rate will be based on creditworthiness at time of application.
The information provided on this page is updated as of 08/10/2023. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.
What to do next?
Learn more about student loan repayment