Getting Student Loans Out of Default

by MAtthew RossJune 28th, 2019

If your drowning in student loan debt, you’re not alone, it is estimated that over 1 million people will end up defaulting on their federal student loans every year. A staggering 40% of all borrowers are expected to fall behind on their student loan payments and end up in default by 2023.

The student loan deficit in the United States has nearly tripled over the last 10 years and has now broken the charts with over $1.5 trillion outstanding debt. For many borrowers their payments become unmanageable. It is expected that in a matter of only three years, almost 40% of borrowers will default on their federal student loans. 

The last thing you’ll want to do is ignore your defaulted student loans. There are many options to get your loans back into good standing including rehabilitation and consolidation. It is important to get your loans out of default as soon as possible to prevent wage garnishment and treasury offset.

Basics of Student Loan Default

After a borrower has neglected to make a payment their loans are then transferred to a collection’s agency were the account can be marked for wage garnishment. Time variations could occur depending on your type of loans.

  • Federal Student Loans – Direct Student Loans will fall into default after a borrower has failed to make a payment for over 9 months. If you have Perkins loans you have no wiggle room and they will default after missing just 1 payment. 
  • Private Student Loans – Default timelines for private student loans very from lender to lender. A generally accepted outline is by the CFPB which states that loans are defaulted after just 3 missed payments OR over 120 days of delinquency. To figure out your exact terms make sure to review your promissory note. 

How do you know your student loans are in default?

The easiest way to determine if your student loans are in default would be to login to your loan servicer portal. Once logged in you will be able to see your payment history and determine if your loan status has switched to default. If you are unable to login to your loan servicer account or you are unsure who your loan servicer is, you may also…

  • Pulling your credit report can be a simple solution to see all your outstanding debt and the current status of those loans. This will also show you both federal and private loans on one page. 
  • If you only have federal student loans you can check with to see any outstanding balances you may have with your federal student loans. This option will not show any private debt you may have. 
Federal loan borrowers with loans in default: 5.2 million

What will happen if I default on student loans?

If you only have federal student loans the collections agencies can garnish your wages until the loan is paid in full. They can also withhold your income tax checks and other payments like SSA Checks. 

Private student loan borrowers are not eligible to have their government checks garnished. Lenders can take the borrower to court and get a judgement in their favor. If a judgement is received, they will be allowed to garnish your paychecks and possibly your bank account as well. 


Defaulting can ruin your credit score. This can affect your credit score for over 7 years. This ding will prevent you from getting a loan for a car or a home, start a new cell phone plan or prevent you from certain employment opportunities. 

How do you get student loans out of default?

The Department of Education provides defaulted borrowers 2 opportunities to recover from defaulted loans: rehabilitation and consolidation.


Many borrowers are only left with one option to get out of default and that is Rehab. This is a very exhausting process, and many choose to seek help for this. The program is 9 months long and once completed it will remove the Default from your credit record. You only get this option once during the life of the loans, should you fall into default again you will not be able to rehabilitate.


This seems to be the most viable option for most borrowers who have fallen behind. A new consolidation loan will benefit you by lowering your interest rate and stopping the compounding interest caused by multiple loans. Once you consolidate you loans you will enter an income driven plan where your payments will be more affordable.