What to Do if You Default on Your Student Loans


Defaulting on your student loans can feel like you’re stuck in a financial nightmare, but it’s not the end of the world. There are steps you can take to get back on track and regain control of your finances. Let’s dive into what you should do if you find yourself in this situation.

Understanding Student Loan Default

First things first, let’s understand what it means to default on your student loans.

What Does Default Mean?

Defaulting on a student loan typically means you’ve missed payments for a specified period, usually 270 days for federal loans. When this happens, your loan becomes delinquent and eventually goes into default, leading to severe consequences.

Consequences of Default

  • Credit Score Impact: Your credit score takes a significant hit, making it harder to get future loans or credit cards.
  • Wage Garnishment: Your wages can be garnished, meaning money is taken directly from your paycheck to pay off the loan.
  • Tax Refund Seizure: The government can seize your tax refunds to cover the defaulted loan.
  • Loss of Eligibility for Benefits: You lose eligibility for deferment, forbearance, and new federal student aid.

Signs You’re Heading Towards Default

How do you know if you’re close to defaulting on your student loans? Here are a few red flags.

Missed Payments

Missing even one payment can set you on a path to default. It’s essential to keep track of your payment schedule.

Ignoring Loan Servicer Notices

Loan servicers send notices when you miss payments. Ignoring these can lead to more significant issues down the line.

Financial Hardships

Unexpected financial hardships, like losing your job or medical emergencies, can make it difficult to keep up with payments.

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Steps to Take If You Default

If you default on your student loans, don’t panic. Here’s what you should do.

Contact Your Loan Servicer Immediately

The first step is to reach out to your loan servicer. They can help you understand your options and guide you through the process of getting back on track.

Discuss Repayment Options

Discuss different repayment options with your loan servicer. You might qualify for an income-driven repayment plan, which adjusts your payments based on your income.

Explore Deferment or Forbearance

Ask about deferment or forbearance, which can temporarily pause your payments if you’re experiencing financial hardship.

Consider Loan Rehabilitation

Loan rehabilitation is a one-time opportunity to remove the default status from your credit report.

Rehabilitation Process

To rehabilitate your loan, you typically need to make nine on-time, consecutive payments. These payments are often lower and more manageable.

Benefits of Rehabilitation

Once you complete the rehabilitation process, the default status is removed from your credit report, and you regain access to federal benefits.

Loan Consolidation

Another option is loan consolidation, which combines your defaulted loans into a single loan.

How Consolidation Works

Loan consolidation allows you to combine multiple federal student loans into one, with a fixed interest rate based on the average of the interest rates on the loans being consolidated.

Pros and Cons

  • Pros: Simplifies your payments, potentially lowers your interest rate, and gets your loans out of default.
  • Cons: Extends the repayment period, which can lead to paying more interest over time.

Seek Professional Help

Sometimes, you need professional help to navigate the complexities of student loan default.

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Credit Counseling

Credit counselors can help you create a budget, manage your debts, and find the best strategy to get out of default.

Legal Advice

In some cases, you might need legal advice, especially if your wages are being garnished or you’re facing other severe consequences.

Avoiding Future Defaults

Once you’ve dealt with the default, it’s crucial to avoid falling into the same trap again.

Create a Budget

Creating a budget helps you manage your money better and ensures you have enough to cover your loan payments.

Set Up Automatic Payments

Setting up automatic payments can prevent missed payments, ensuring you stay on track.

Monitor Your Loans Regularly

Regularly check your loan status and communicate with your loan servicer to stay informed about your repayment options.

Know Your Rights

It’s also important to know your rights as a borrower.

Fair Debt Collection Practices Act (FDCPA)

The FDCPA protects you from abusive and unfair debt collection practices. Familiarize yourself with these rights to ensure you’re treated fairly.

Additional Resources

There are numerous resources available to help you manage your student loans and avoid default.

Federal Student Aid (FSA)

The FSA website offers comprehensive information about student loan repayment, default, and rehabilitation options.

Non-Profit Organizations

Non-profit organizations, like the National Foundation for Credit Counseling (NFCC), provide free or low-cost counseling services.

The Emotional Impact of Default

Defaulting on your student loans can be a stressful experience, but it’s essential to address the emotional toll it can take.

Managing Stress

Financial stress can affect your mental health. Here are some ways to manage it.

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Seek Support

Talk to friends, family, or a mental health professional about your situation. Support from others can be invaluable.

Practice Self-Care

Engage in activities that help you relax and recharge. Whether it’s exercising, reading, or spending time with loved ones, self-care is crucial.

Stay Positive

Remember, defaulting on your student loans doesn’t define you. With the right steps and support, you can overcome this challenge.


Defaulting on your student loans is a serious issue, but it’s not insurmountable. By understanding the consequences, taking immediate action, exploring all available options, and seeking professional help, you can get back on track. Avoid future defaults by creating a budget, setting up automatic payments, and regularly monitoring your loans. Remember, it’s crucial to manage the emotional impact of default and stay positive throughout the process. You’re not alone, and with the right approach, you can regain control of your financial future.

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