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What is Student Loan Default and How to Recover

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Note:  If you consolidate federal loans together with private loans using a private lender, you may forfeit benefits you had with your federal loans.

Refinance Your Student Loans

Refinancing your student loans with a private lender is the only way to potentially get a lower interest rate. Student loan refinance rates are based on market trends. The rate you qualify for will depend on the creditworthiness of you or your cosigner.

With a student loan refinance you may also choose your repayment term. A longer repayment term may help to reduce the amount of your monthly payment. Just remember the longer your repayment term, the more you will be paying in interest over the life of your loan.

You may include both federal and private student loans, any combination of the two, or even just one single loan in a student loan refinance. Refinancing works similarly to consolidation; whichever loans you choose to refinance will be rolled into one new loan. If you include federal student loans in a private student loan refinance, you will forfeit your federal student loan benefits.

Best Student Loan Refinance Lenders

Recommendation
Best for Student Loan Refinancing
Interest Rates

Variable as low as: 1.74% APR1

Fixed as low as: 2.49% APR1

Repayment Terms

5, 7, 10, 15, 20 years

Recommendation
Best for Student Loan Refinancing
Interest Rates

Variable as low as: 2.94% APR1

Fixed as low as: 2.99% APR1

Repayment Terms

5, 10, or 15 years2

Recommendation
Best for Student Loan Refinancing
Interest Rates

Variable: 1.99% APR - 5.74% APR2

Fixed: 2.99% APR - 6.74% APR2

Repayment Terms

10-yr/20-yr repayment term based on creditworthiness

Recommendation
Best for Student Loan Refinancing
Interest Rates

Variable as low as: 2.15% APR1

Fixed as low as: 2.99% APR1

Repayment Terms

5, 8, 12, or 15 years

Recommendation
Best for Student Loan Refinancing
Interest Rates

Variable Rates: Rates between 1.87% - 5.41 APR1

Fixed Rates:  Rates between 2.30% - 5.94% APR1

Repayment Terms

5, 10, 15, 20, 25 years

 

How to Get Student Loans Out of Default

Once you are in student loan default, you need to come up with a plan to get out. Defaulting on a student loan can have serious consequences that affect you for years to come.

Repay Your Student Loans in Full

If your student loan has entered default, the full amount you owe is due immediately. Repaying a defaulted loan, immediately and in full, is not a possibility for most defaulted borrowers. Strive to continue to pay on your loan, even if it is in default. This will help to prevent the accumulation of additional late fees. You may also explore the option of a student loan settlement. This is where you settle the debt for less than you owe (don’t expect significant savings).

Student Loan Rehabilitation

Student loan rehabilitation applies to federal student loans only. In order to rehabilitate your loan, you must first contact your loan servicer. If you do not know who your loan servicer is, you can find that information by logging in to your MyFederalStudentAid account. To rehabilitate your loan, you must agree in writing to make nine monthly payments within 20 days of the due date during a period of ten consecutive months.

The amount of the monthly payments will be determined by your loan servicer using the following formula: 15 percent of your annual discretionary income divided by 12. If you cannot afford these payments, you may request that your loan servicer calculate an alternative monthly payment. Be prepared to provide documentation of your monthly income and expenses.

Student Loan Consolidation

Student loan consolidation is another option for getting federal student loans out of default. To consolidate defaulted student loans you must either agree to repay the new Direct Consolidation Loan under an income-driven repayment plan, or make three consecutive, on-time payments in full on the defaulted loan.

Loan Rehabilitation vs Consolidation

The following table applies to federal student loans only.

Benefit Regained Loan Rehabilitation Loan Consolidation
Eligibility for Deferment Yes Yes
Eligibility for Forbearance Yes Yes
Choice of Payment Plans Yes Yes - with limitations
Eligibility for Loan Forgiveness Programs Yes Yes
Eligibility to Receive Federal Student Aid Yes Yes
Removal of the Record of Default from Your Credit History Yes – The default will be removed but the record of late payments will stay. No

Source: https://studentaid.gov/manage-loans/default/get-out

 

Refinance Offers

  • Interest Rates
    • Fixed: 2.99% APR - 6.74% APR2
    • Variable: 1.99% APR - 5.74% APR2
  • Loan Min/Max
    • Minimum: $5,000
    • Maximum: Consolidate up to the aggregate amount of your education loan debt. Maximum limits may apply.
  • Repayment Terms: 10-yr/20-yr repayment term based on creditworthiness
  • Degree Requirements: Students with loans from eligible schools may apply.
  • Interest Rates
    • Fixed as low as: 2.99% APR1
    • Variable as low as: 2.94% APR1
  • Loan Min/Max
    • Minimum: $5,000
    • Maximum: $300K
  • Repayment Terms: 5, 10, or 15 years 2
  • Degree Requirements: Must have graduated from a public or private, not-for-profit, degree granting institution.
  • Interest Rates
    • Fixed Rates: Rates between 2.30% - 5.94%1
    • Variable Rates: Rates between: 1.87%-5.41%1
  • Loan Min/Max
    • Minimum: $5,000
    • Maximum: Varies by highest level of education received
  • Repayment Terms: 5, 10, 15, 20, 25 years
  • Degree Requirements: Required completion of degree
What are my private student loan options?