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Defaulting on student loans can happen after a borrower misses a series of payments on their loan. The number of loan payments missed before the loan enters default is different depending on whether the loans are federal or private, but the consequences of defaulting on either type of loan can be serious. Ramifications may include having the loans go to a collections agency and potential negative impacts on a borrower’s credit score.

Read on to learn more about what a default on student loans is and what happens if you default on student loans.

What Is a Defaulted Student Loan?

A default on student loans means you stop paying student loans by failing to make the required monthly payments on federal or private loans.

For example, if a borrower is having issues making monthly payments on their federal student loans and they stop paying them, after a certain number of missed payments, the loan will enter default.

There are serious repercussions for defaulting on student loans. What happens if you default on student loans is the balance of your loan becomes due in full immediately, your wages may be garnished, and your credit rating is negatively impacted, among other consequences.

How Long It Takes to Enter Default

The length of time it takes to enter default depends on the type of student loan a borrower has, including whether the loan is a federal or private loan.

When Do Student Loans Go Into Default?

For federal Direct Loans and Federal Family Education Loans (FFEL), if a borrower fails to make a payment for 270 days, their loan is considered to be in default. (If a borrower has a federal Perkins loan, their loan can be deemed to be in default after just one missed payment.)

Private student loans have a different timeline for default, which can vary by lender. In general, however, private student loans are considered to be in default after 90 or 120 days of missed payments, depending on the lender.

Student Loan Default vs. Delinquency

Student loan delinquency is essentially the early stage of missing a required loan payment. Federal student loans are considered delinquent the first day after a borrower misses a payment. Federal student loans are typically reported to the credit bureaus as delinquent if a borrower is 90 or more days past due on loan payments.

A delinquent federal student loan typically goes into default if a borrower is at least 270 days past due on required payments.

Private student loan lenders can set their own parameters for delinquency vs. default. Banks, credit unions, and online lenders offer private student loans. Some may consider borrowers in default if they are 90 or more days delinquent on a private student loan. Others may define default as falling 120 days past due.

Can You Default on Student Loans?

Yes, it’s possible for borrowers to default on student loans. If you are struggling to make monthly payments on your federal student loans and just stop paying them, after a certain number of missed payments, the loan will be in default.

Private student loans can also go into default, though, as mentioned above, this can happen more quickly than it does with a federal student loan.

Recommended: What is the Student Loan Default Rate?

How to Default on Student Loans

Defaulting on federal student loans is a process that takes place over a period of nonpayment. Typically when a borrower first misses a payment, the loans are delinquent but not yet in default. At 90 days past due, the lender can report the missed payments to credit bureaus. And, as noted above, when the loan is 270 days past due, student loans are typically considered in default.

For private student loans, the terms for default can vary. Private student loan lenders may consider borrowers in default if they are 90 or 120 days or more past due on a required payment.

Private lenders may also place student loans in default if the borrower declares bankruptcy or defaults on another loan. Terms can vary by lender, so if you have private student loans, double-check how they define default.

Defaulting on student loans can have serious consequences, but there are ways to avoid defaulting on student loans — or to recover if your loans are currently in default.

What Happens When Your Student Loans Default?

Here are four potential consequences of what happens if you default on student loans.

1. Collection Agencies Might Come Knocking

When a borrower defaults on student loans, the lender may eventually turn the debt over to a collection agency. The collection agency will then attempt to recover the payment, typically reaching out with frequent letters and phone calls.

Collection agencies may also attempt to determine what other assets, including bank accounts or property, would allow the borrower to pay their debt. On top of dealing with regular calls from debt collectors, borrowers may also be responsible for paying any additional fees the collection agency charges on top of their student loan balance.

2. Loan Forgiveness and Forbearance Options Are No Longer on the Table

Student loan default on federal loans means that the federal government can revoke a borrower’s access to programs that might make it easier for them to pay their loans, including loan forgiveness or student loan forbearance.

This means that even if a borrower qualifies for a forgiveness program like Public Service Loan Forgiveness, they could be rendered ineligible if they let their loans go into default.

3. Your Credit Score Might Be Impacted

Once student loans are in default, the lender or the collection agency will report the default to the three major credit bureaus. This means that the borrower’s credit score may be negatively impacted. This can make it harder to get a competitive interest rate when borrowing for other needs, and make it difficult to buy a house or car.

4. You Might Have to Give up Your Tax Refund, or a Portion of Your Wages

If the loan holder or a collection agency can’t recover the amount owed, they can request that the federal government withhold a borrower’s tax refund and even garnish some of their income. For example, if a borrower filed their taxes and was eligible for a refund, the government might instead take that refund money and apply it toward the defaulted student loan balance. The government might also garnish a borrower’s wages, which typically means that they can take up to 15% of each paycheck to pay back the student loans.

Recommended: What Happens When Your Student Loans Go to Collections?

5. You Could Lose Eligibility for Future Federal Aid

When federal student loans go into default, a borrower loses eligibility for additional federal aid, such as federal loans and federal Pell Grants. If they were planning to return to school, for instance, they would likely not be able to get federal student aid to do so.

How Can You Get Student Loans Out of Default?

Defaulting on student loans is a serious matter, but there are ways of getting out of default.

To help recover from defaulted student loans, a borrower could start by speaking with their student loan provider. The loan provider will likely be able to talk through the repayment options available to them based on their personal financial situation. The loan provider wants the borrower to pay, which means that they might be able to help find a payment plan that works.

For example, they may be able to offer options tailored to a borrower’s individual circumstances, such as satisfying the debt by paying a discounted lump sum, setting up a monthly payment plan based on income, consolidating debts, or even student loan rehabilitation for federal loans (see more about this below).

How to Avoid Defaulting on Student Loans

Of course, even if a borrower can get themselves out of student loan default, the default may still impact their credit score and loan forgiveness options. That’s why it’s generally best to take action before falling into default. If the student loan payments are difficult to make each month, there are things a borrower can do to change their situation before their loans go into default, such as:

•   Speaking to the lender: Borrowers can talk to their lender directly. The lender should be able to explain any alternate student loan repayment plans available to them.

•   Considering repayment plans: For federal loans, borrowers may be able to enroll in an income-driven repayment (IDR) plan. These repayment plans aim to make student loan payments more manageable by basing them on the borrower’s discretionary income and family size.

For borrowers with loans taken out before July 1, 2026, there are several options for income-driven repayment. Depending on the plan, the repayment term is extended to 20 to 25 years and payments are capped at 10% to 20% of a borrower’s income. However, for borrowers taking out their first loans on or after July 1, 2026, there are only two repayment options: the Standard Repayment Plan, which is a 10- to 25-year repayment plan, and the Repayment Assistance Plan (RAP).

RAP is similar to other income-driven plans that tie payments to income level and family size. On RAP, payments range from 1% to 10% of adjusted gross income for up to 30 years. At that point, any remaining debt will be forgiven. If a borrower’s monthly payment doesn’t cover the interest owed, the interest will be cancelled.

•   Exploring deferment: Another possible option to consider if a borrower is in temporary financial straits is student loan deferment, which can temporarily pause student loan payments. For certain federal student loans, like federal Direct Subsidized Loans, borrowers will generally not be responsible for the interest that accrues during deferment. However, for other types of federal loans, they may be responsible for the accruing interest. Most borrowers need to apply for deferment and meet eligibility requirements.

Recommended: Student Loan Deferment vs. Forbearance

Is Refinancing an Option?

Student loan refinancing may potentially help a borrower avoid defaulting on their student loans by combining all their student loans into one new loan. When borrowers refinance student loans, they might be able to secure a lower interest rate or loan terms that work better for their situation.

However, if a borrower is already in default, refinancing defaulted student loans could be difficult. When a student loan is refinanced, a new loan is taken out with a private lender. As a part of the application and approval process, lenders will review factors including the borrower’s credit score and financial history among other factors.

Borrowers who are already in default may have already felt an impact on their credit score, which can impact their ability to get approved for a new loan. Also, it’s important to understand that if federal student loans are refinanced they are no longer eligible for federal programs or protections such as income-driven repayment and forgiveness.

Help on Defaulted Student Loans

If a borrower has defaulted on a federal student loan, there are some programs that can help them get them out of default.

Loan Rehabilitation

To apply for student loan rehabilitation, a borrower can contact their loan servicer. In order to rehabilitate a federal student loan the borrower must agree to make nine voluntary, reasonable, and affordable monthly payments within 20 days of the payment due date. This agreement must be completed in writing. All nine payments must be made within 10 consecutive months.

Private student loans do not qualify for federal student loan rehabilitation. Federal Direct Loans or loans made through the Federal Family Education Loan (FFEL) program qualify for student loan rehabilitation.

Loan Consolidation

Consolidating federal student loans into a federal Direct Consolidation Loan is another option to get defaulted federal student loans out of default. To consolidate defaulted federal student loans into a new Direct Consolidation Loan there are two options:

•   Repaying the consolidated loan on an income-driven repayment plan.

•   Making three monthly payments on the defaulted loan before consolidating. These payments must be consecutive, voluntary, on-time, and account for the full monthly payment amount.

Again, private student loans are not eligible for consolidation through a Direct Consolidation Loan.

Consumer Credit Counseling Services (CCCS)

Consumer Credit Counseling Services (CCCS) are usually non-profit organizations that offer free or low-cost counseling, education, and debt repayment services to help people facing financial difficulties.

For a defaulted student loan, a credit counselor may be able to help by looking at a borrower’s entire financial situation along with their student debt, laying out their options, then working with them to come up with the best option for student loan debt relief.

If the borrower is struggling with multiple debts, a credit counselor may be able to set up a debt management plan in which they make one monthly payment to the credit counseling organization, and they then make all of the individual monthly payments to their creditors.

While counselors usually don’t negotiate down debts, they may be able to lower a borrower’s monthly payments by working with their creditors to increase their loan terms or lower interest rates.

Credit counseling agencies are not the same thing as debt settlement companies. Debt settlement companies are typically profit-driven businesses that often charge steep fees. Debt settlement can also do long-term damage to a borrower’s credit.

To help find a reputable credit counselor, borrowers might start their search using the U.S. Department of Justice’s list of approved credit counseling agencies.

Legal Aid or Financial Hardship Support Services

For borrowers who need legal help with defaulted student loans, there are some legal aid resources available. Legal aid is typically free of charge to those below a certain level of income or who meet other requirements. To find legal aid in your state (if it is available), check LawHelp.org, a national nonprofit that provides referrals to legal aid.

Another resource is the American Bar Association’s Legal Help Finder, which can help low-income borrowers locate free legal help.

For borrowers who don’t qualify for free legal help with their student loans, the National Association of Consumer Advocates may be able to assist in finding a lawyer in their area who handles student loan issues.

The Takeaway

Student loan default can have serious negative effects on a borrower’s credit score and financial stability. If a borrower is worried about defaulting on their student loans, or they have already defaulted, there are immediate steps they can take to help remedy the situation before it gets worse. These include contacting their lender or loan servicer to learn about options available, which may include loan rehabilitation, loan consolidation, consumer credit counseling, or refinancing loans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

Does a defaulted student loan ever go away?

It is possible to rehabilitate or consolidate a defaulted federal student loan to get it out of default so that it “goes away.” Some private lenders may offer programs or assistance to borrowers facing default, but they are not required to do so.

Will my student loans come out of default if I go back to school?

No, if you have student loans already in default, going back to school will not remove them from default. Students who have student loans in default will need to get the loans out of default before they can qualify to borrow any additional federal student loans.

Are defaulted student loans forgiven after 20 years?

Defaulted loans are not forgiven after 20 years. Students in default may consolidate or rehabilitate their loan and then enroll in an income-driven repayment plan, which could potentially qualify them for loan forgiveness at the end of their loan term, up to 25 years.

Can defaulted student loans affect my taxes or wages?

Yes, if you default on federal student loans, the government may garnish your wages — which means your employer may be required to withhold a portion (typically up to 15%) of your pay and send it to the loan servicer to repay your loan. In addition, your tax refunds may be withheld and the money applied to repayment of your defaulted loan.

What are the fastest ways to recover from student loan default?

Loan consolidation is generally one of the fastest ways to recover from student loan default. To do it, a borrower consolidates their defaulted loans into a new Direct Consolidation Loan, which immediately ends the default status of the loans. The borrower must agree to repay the consolidation loan on an income-driven repayment (IDR) plan or they must make three consecutive on-time full monthly payments before consolidating.

Just be aware that when you consolidate a defaulted loan or loans, the default remains on your credit report for seven years.

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