Falling behind on your student loan payments?
Question 7: CAN YOU PAY OFF YOUR LOAN IN FULL?
If you can afford to pay off your defaulted federal student loan, this is the fastest way to settle your debt. Borrowers should also be aware that repaying your defaulted student debt will not undo the negative effect on your credit report caused by your default.
No, I do not need to get credit as quickly as possible.
Question 6: DO YOU WANT TO GET OUT OF DEFAULT SO YOU CAN GET CREDIT?
YES, I WOULD LIKE TO PAY OFF MY LOAN IN FULL. WHAT SHOULD I DO NEXT?
Contact your debt collector to learn more about your options and to determine your pay-off balance. For some borrowers, this can be the cheapest way to bring a federal student loan out of default.
Your defaulted debt will be gone afterward, but it will continue to appear on your credit report as a defaulted loan that was repaid. By repaying your defaulted federal loan, you will restore your eligibility for federal student aid, if you chose to go back to school.
TIP: Ask the debt collector for specific information about fees. The costs associated with bringing your loan out of default may vary substantially depending on your individual circumstances.
If a debt collector or loan servicer refuses to offer you an option for which you believe you qualify, you should ask to speak with the debt collector’s Special Assistance Unit. If your issue has not been resolved through the servicer’s Special Assistance Unit, you may wish to review your options through the Federal Student Aid Ombudsman at the U.S. Department of Education.
TIP: When speaking with your servicer or a debt collector, be sure that you have written documentation about what federal student debt you owe. If you are concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform them of the problem. Remember, that system shows only your federal student loans, not your private student loans.
Yes, my student loan default is hurting my credit and I want to fix it as quickly as possible. What should I do next?
Your student loan amounts and payment history will go on your credit report. If you make your payments on time, it will help your credit. In contrast, failure to make on-time payments will hurt your credit. Defaulting on your federal student loan makes it more difficult and more expensive to take out a mortgage, to finance a new car, or to qualify for a credit card.
If you are currently in default on a federal student loan and you are interested in pursuing an option with the greatest benefit to your credit, you may benefit from rehabilitation. Rehabilitation means that your loan will be taken out of default status after you make a series of consecutive (generally, nine) on-time, monthly payments.
This won’t repair your credit completely—your previous missed payments may still show up on your credit report—but any default notation will be removed. These payments must be “reasonable and affordable” to you—this means that they should be based on your individual financial situation. Your servicer or debt collector may ask you to provide documentation to demonstrate that you need a lower payment than they are suggesting. When negotiating with your debt collector, the law does not require a specific “minimum payment” amount; however, once you agree to a payment plan, you are required to make your monthly “reasonable and affordable” payment in order to rehabilitate your defaulted loan.
You should contact your servicer or debt collector immediately to learn more about your options and to make arrangements to bring your loan out of default.
TIP: Ask the debt collector for specific information about fees. The costs associated with bringing your loan out of default may vary substantially depending on your individual circumstances.
If a debt collector or loan servicer refuses to offer you an option for which you believe you qualify, you should ask to speak with the debt collector’s Special Assistance Unit. If your issue has not been resolved through the servicer’s Special Assistance Unit, you may wish to review your options through the Federal Student Aid Ombudsman at the U.S. Department of Education.
TIP:When speaking with your servicer or a debt collector, be sure that you have written documentation about what federal student debt you owe. If you are concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform them of the problem. Remember, that system shows only your federal student loans, not your private student loans.
NO, I AM UNABLE TO PAY OFF MY LOAN IN FULL.
- Rehabilitation means that your loan will be taken out of default status after you make a series of consecutive (generally, nine) on-time, reasonable and affordable, payments. You can typically only rehabilitate a loan once. This is the only way to remove the default notation from your credit history. If you chose to go back to school, you will also restore your eligibility for federal student aid after you make the sixth of nine monthly payments.
- Consolidation. Through consolidation, your defaulted loans are paid off by a new loan with new repayment terms. If you cannot afford to repay your loan in full, this is the fastest way to get out of default and enroll in one of the U.S. Department of Education’s alternative payment plans. If you cannot afford to pay off your loan in full, it is also the fastest way to get out of default and restore your eligibility for federal student aid. Borrowers should also be aware that consolidation will not undo the negative effect on your credit report caused by your default.
- Repayment. If you can afford to pay off your defaulted federal loan, this is the fastest way to settle your debt. Under certain circumstances, your debt collector may be authorized to waive some of your outstanding fees and other collection costs. For some borrowers, this can be the cheapest way to bring a federal student loan out of default. Your defaulted debt will be gone afterward, but it will continue to appear on your credit report as a defaulted loan that was repaid. You will also restore your eligibility for federal student aid, if you chose to go back to school.
You should contact your servicer or debt collector immediately to learn more about your options and to make arrangements to bring your loan out of default.
TIP: Ask the debt collector for specific information about fees. The costs associated with bringing your loan out of default may vary substantially depending on your individual circumstances.
If a debt collector or loan servicer refuses to offer you an option for which you believe you qualify, you should ask to speak with the debt collector’s Special Assistance Unit. If your issue has not been resolved through the servicer’s Special Assistance Unit, you may wish to review your options through the Federal Student Aid Ombudsman at the U.S. Department of Education.
TIP: When speaking with your servicer or a debt collector, be sure that you have written documentation about what federal student debt you owe. If you are concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform them of the problem. Remember, that system shows only your federal student loans, not your private student loans.
No, I don’t need to go back to school in the fall.
Question 5: Do you need to go back to school in the fall?
Yes, I would like to go back to school in the fall and I need financial aid. What should I do next?
If you are currently in default on a federal student loan and plan to go back to school, you may benefit from a direct consolidation loan. If you cannot afford to pay off your loan in full, this is the fastest way to get out of default and restore your eligibility for federal student aid.
Through consolidation, your defaulted loans are paid off by a new loan with new repayment terms. If you do not make any payments on your default loan(s) prior to consolidating them, you will be required to immediately sign-up for one of the alternative payment plans available to all federal student loan borrowers.
Remember to ask your debt collector for specific information about fees. The costs associated with bringing your loan out of default may vary substantially depending on your individual circumstances.
Before you consolidate, you should make sure you understand the terms of this new payment arrangement and the terms of your new loan. If you default again, your only option to get out of default is to agree to a repayment plan with your debt collector.
Under most circumstances, you have the right to pursue these options. You can request information on both of these options from your debt collector or you may apply for a new direct consolidation loan with the U.S. Department of Education.
TIP: Loan rehabilitation may be a better option for some borrowers; however, rehabilitation can take up to 10 months to complete. Like consolidation, loan rehabilitation restores your federal student aid eligibility but will also remove the default notation from your credit history. And in some cases, it can be cheaper than consolidation.
You should contact your servicer or debt collection agency immediately to learn more about your options and to make arrangements to bring your loan out of default.
If a debt collector or loan servicer refuses to offer you an option for which you believe you qualify, you should ask to speak with the debt collector’s Special Assistance Unit. If your issue has not been resolved through the servicer’s Special Assistance Unit, you may wish to review your options through the Federal Student Aid Ombudsman at the U.S. Department of Education.
TIP: When speaking with your servicer or a debt collector, be sure that you have written documentation about what federal student debt you owe. If you are concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform them of the problem. Remember, that system shows only your federal student loans, not your private student loans.
NO, I AM UNABLE TO MAKE ANY PAYMENTS TOWARD A FEDERAL STUDENT LOAN THAT IS CURRENTLY IN DEFAULT. WHAT SHOULD I DO NEXT?
If you are currently in default on a federal student loan and cannot afford to make any payments toward your loan, you may benefit from a direct consolidation loan. If you cannot afford to pay off your loan in full, this is the fastest way to get out of default.
Under most circumstances, you have the right to pursue this option. You can either request a consolidation application from your debt collector or you may apply for a new direct consolidation loan with the U.S. Department of Education.
Remember to ask your debt collector for specific information about fees. The costs associated with bringing your loan out of default may vary substantially depending on your individual circumstances.
Through consolidation, your defaulted loans are paid off by a new loan with new repayment terms. If you do not make any payments on your default loan(s) prior to consolidating them, you will be required to immediately sign-up for one of the alternative payment plans available to all federal student loan borrowers. You will also restore your eligibility for federal student aid, if you chose to go back to school.
Before you consolidate, you should make sure you understand the terms of this new payment arrangement and the terms of your new loan. If you default again, your only option to get out of default is to agree to a repayment plan with your debt collector.
TIP: Loan rehabilitation may be a better option for some borrowers; however, rehabilitation can take up to 10 months to complete. Like consolidation, loan rehabilitation restores your federal student aid eligibility but will also remove the default notation from your credit history. And in some cases, it can be cheaper than consolidation.
You should contact your servicer or debt collection agency immediately to learn more about your options and to make arrangements to bring your loan out of default. If a debt collector or loan servicer refuses to offer you an option for which you believe you qualify, you should ask to speak with the debt collector’s Special Assistance Unit. If your issue has not been resolved through the servicer’s Special Assistance Unit, you may wish to review your options through the Federal Student Aid Ombudsman at the U.S. Department of Education.
TIP: When speaking with your servicer or a debt collector, be sure that you have written documentation about what federal student debt you owe. If you are concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform them of the problem. Remember, that system shows only your federal student loans, not your private student loans.
TIP: Remember that you have rights when dealing with debt collectors, and it is against the law for a collector to abuse, harass, or make false statements to you.
Question 4: Are you able to make any payments on your defaulted federal loan?
NO, I have not defaulted on my private (non-federal) student loan (Or I am unsure about my loan status).
If you have not defaulted on your private student loan but have missed or are having trouble making payments, you should contact your servicer immediately to discuss repayment options and to determine if it is possible for you to avoid default.
YES, I HAVE DEFAULTED ON MY PRIVATE (NON-FEDERAL) STUDENT LOAN.
If you are in default on a private (non-federal) student loan, you may receive a notice that your entire student loan must be paid off immediately and in full. You may have other options. If you are in default, it is important that you know your rights and responsibilities.
If you fail to repay a private student loan in default, it can severely damage your credit rating, making it difficult to take out a mortgage, buy a car or even get a credit card. You may be subject to collection efforts by a debt collector or a law firm. This can include repeated phone calls and letters sent to your home and work. You might even be sued by a debt collector seeking a court order to garnish your wages—this means that money will be taken directly from your paycheck in order to satisfy your debt. And, unlike most other types of consumer debt, student loans cannot be discharged through bankruptcy, absent extraordinary circumstances (called “undue hardship”)
TIP: Within five (5) days of initial contact, every debt collector must send a written “validation notice” indicating how much money you owe, the name of the creditor you owe, and what to do if you think you do not owe this debt. You should keep this notice and use it as a reference when speaking with a debt collector.
Unlike federal student loans, there are no standard options for dealing with a creditor or a collection agency on a defaulted private student loan, other than paying what is owed. However, you may be able to negotiate or set up a payment plan. You may also have the opportunity to settle your debt for less than you currently owe.
TIP: Remember that you have rights when dealing with debt collectors , and it is against the law for a collector to threaten, harass or make false statements to you.
Dealing with a debt collector can be stressful. For borrowers in default, it is important to remember that there are major differences between federal and private student loans. The federal government has extraordinary tools to collect on defaulted federal student loans; however, many of these tools are not available to debt collectors seeking to collect on your defaulted private student loan. A debt collector trying to collect payments on a private student loan can never:
- Garnish your wages without a court order
- Seize your federal or state tax refund
- Garnish your social security or social security disability check
- Prevent you from receiving federal student aid to go back to school in the future
TIP: A debt collector seeking to recover a private student loan does not work for, represent or collect on behalf of the U.S. Department of Education or any other branch of the federal government.
You also have the right to stop a debt collector from attempting to contact you. You must notify the debt collector in writing to stop. You should make a copy of your letter. Send the original by certified mail and pay for a “return receipt” to document what the debt collector received. Once the debt collector receives your letter, the debt collector may not contact you again, with two exceptions: the debt collector may inform you that efforts to collect the debt are being terminated; and may advise you that the debt collector or the creditor intend to take a specific action, like filing a lawsuit. This does not eliminate your debt, prevent a negative credit report, or stop the debt collector from filing a law suit against you, but it should end the phone calls.
TIP: Unlike federal student loans, there is a statute of limitations on the collection of private student debt. You should contact your state Attorney General to learn more out about your options and your rights.
If you think that a debt collector has lied to you or broken the law, contact the Consumer Financial Protection Bureau and file a complaint.
Remember, it is illegal for a private student loan debt collector to pretend to be from the U.S. Department of Education or to threaten to use any of the extraordinary tools available to collect on federal student loans(like offsetting your tax refund or garnishing your wages without a court order).
Question 3: Are you currently in default?
NO, I have not defaulted on my federal student loan (Or I am unsure about my loan status).
If you have not received a letter from your servicer or from a debt collector and you believe you may be in default, you should contact your servicer immediately to discuss repayment options and to determine if it is possible for you to avoid default.
What is the best student loan repayment option for you? Our student debt repayment assistant can help point you in the right direction to make sure your repayment plan is manageable.
NO, I have not missed any payments on my private(non-federal) student loans, but I am having trouble managing my debt.
What is the best student loan repayment option for you? Our student debt repayment assistant can help point you in the right direction to make sure your repayment plan is manageable.
Yes, I have defaulted on my federal student loan.
If you are in default on a federal student loan, you may receive a notice that your entire student loan must be paid off immediately and in full. If you are in default, it is important that you know your rights and responsibilities.
However, you do have a path to get out of default, and it doesn’t always involve making a large payment. In some cases, you may not need to make any payments at all.
In order to determine how to best handle your defaulted federal student loan, you must first determine if you have the ability to make any payments toward your loan.
Yes, I would like to begin to repay a federal student loan that is currently in default. What should I do next?
When speaking with your servicer or a debt collector, be sure that you have written documentation about what federal student debt you owe. If you are concerned that you never borrowed these loans, check the National Student Loan Data System. If the loan does not appear there, contact the collector and inform them of the problem. Remember, that system shows only your federal student loans, not your private student loans.
You have rights when dealing with debt collectors , and it is against the law for a collector to threaten, harass or make false statements to you.
What is the best student loan repayment option for you? The CFPB student debt repayment assistant can help point you in the right direction to make sure your repayment plan is manageable.
YES, I have missed one or more payments on my private (non-federal) student loans.
Unlike federal student loans, many private student loans go into default as soon as you miss three monthly payments (120 days). In some cases, a borrower may default by missing just one or two payments. You can also default on a private student loan if you declare bankruptcy or default on another loan. You should review your private loan contracts carefully to better understand what rights you have if you are worried about going into default.
If you have missed payments on your private student loans and are worried about making future payments, you should contact your servicer immediately to discuss repayment options and to determine if it is possible for you to avoid default.
Know your options
Before you start, it will be helpful to have a list of your loans, as well as the required monthly payment amounts and any written documents you have received from a debt collector. If you don’t have this information, don’t worry.
While this tool can’t give you advice for your exact situation, we hope it can point you in the right direction and help you learn about some of your options.
Question 1: Federal, non-federal?
Are your student loans federal or private (non-federal)?
If you aren’t sure what kind of loans you have, visit the National Student Loan Database System for Students (NSLDS) and select “Financial Aid Review” for a list of all federal loans made to you. Click each individual loan to see who the servicer is for that loan (this is the company that collects payments from you). It’s very important to know your servicer. This might be a different company from the original lender.
TIP: You will be required to use your U.S. Department of Education PIN in order to access NSLDS. Additional information is available through NSLDS.
Federal loans
- Probably has a name like Stafford, Grad PLUS, Direct, or Perkins
- Older federal student loans could be issued by a bank, credit union, your school, or other lending institution through the Federal Family Educational Loan (FFEL) Program
Private (non-federal) loans
- Issued by a bank, credit union, your school, or other lending institution
- Could also be issued by a non-profit or state agency
- Might use names like “private” or “alternative”
- Not issued or guaranteed by the U.S. Department of Education
If you’re not sure whether you have non-federal loans, contact your school’s financial aid office since they may have this information.
YES, I have missed one or more payments on my federal student loans.
If you have missed any student loan payments, you should immediately contact your servicer and find out what steps you can take to avoid default. Your servicer is required to work with you to help you repay your student loan. You should ask your servicer about alternative payment arrangements, including income-based repayment (IBR), which may lower your monthly payment substantially.
If you have gone more than 9 months (270 days) without making a payment on your federal student loans, you may be in default. You may have received a notice or a phone call from the U.S. Department of Education, a guaranty agency or a third-party debt collector, notifying you that you have defaulted on your federal student loan.
Question 2: Have you missed one or more payments on your student loans?
Missing payments on your federal or private student loans can hurt your credit rating and your financial future. Missing a single payment on a student loan can result in late fees, additional interest charges, and can increase the cost of repayment over the lifetime of your loan.
Missing multiple payments can significantly increase the fees and charges and may cause you to default.