Do you have private student loans?
CALL US TO FIND OUT! 800-820-8128

Understanding The Default Student Loan Quicksand

According to a report published by Pew Charitable Trusts on November 6th, 2019, about 20% of all student loans taken out by borrowers from the U.S federal government have become default student loans. This comes at no surprise when you consider the fact that over $1.6 trillion student loan payments are yet to be made. Graduates are having a hard time paying their student loans – be it federal or private student loans.

In a prediction made by the Brookings Institution in Washington, D.C, there is a high probability that around 40% of former students would default on loans they took in 2004 by the year 2023. These figures have a tremendous impact on the future and impact student borrowers. And what about former students who fall within this category? 

Before you apply for a student loan, it’s prudent to know about default student loans, its consequences, and how to avoid a default. 

On this page, you’ll find all you need to know about a default student loan. Some of the key points here include:

  •             Meanings of Delinquency, deferment, and forbearance
  •             Consequences of Default Student Loans
  •             How to avoid going into default
  •             Getting out of default student loan
  •             Refinancing private student loans
  •             Getting help with defaulted student loan

With an understanding of these points, you should be able to prepare a better financial plan for your college days and future, thereby avoiding student loan default. This begins with a clear understanding of what default student loan is.

What is a Student Loan Default?

For student borrowers whose loans have reached maturity, they are required to make monthly repayments. However, should a borrower fail to make these payments, the loans are declared delinquent (more about Delinquency later). This is usually the case during tight financial situations both for private and federal loans.

Hence, a student loan default occurs when delinquent loan persists in Delinquency for a number of days. Generally, the number of days varies depending on the types of federal student loans like the Federal Family Education Loan Program and the William D. Ford Direct Loan Program. For these two, student loans become defaulted after 270 days (approx. 9 months) after failure to make scheduled payments.

For the Federal Perkins Loan Program, borrowers may be considered defaulters right from the day they fail to make a scheduled payment. The terms vary from one loan type to the other, which is why it is vital to carefully go through the agreement before making the payment. In most cases, you need to pay close attention to these three factors mentioned below since they determine the status of loans taken for tertiary education.

These are Delinquency, deferment, and forbearance.

What is Delinquency, deferment or forbearance

A student loan enters Delinquency if the borrower fails to make a payment from the first day of the scheduled payment. If you miss a single month and resume payment the next month, your account stays delinquent. And will remain so until you make specific arrangements like changing repayment plans, deferment, or forbearance.

Changing Repayment Plans

Upon taking a student loan, you first choose a repayment plan. However, like many borrowers later find, repayment may become financially challenging. This is the main reason why many loan accounts become delinquent. Hence to make payment more affordable and bearable for a more extended period, borrowers switch repayment plans. Usually, this change is based on individual income. 

This change is free of any charges. Students can obtain information concerning the change of repayment plans from their loan servicer. Aside, this you also go for the deferment or forbearance options

Deferment or Forbearance

Through these two options, you can stop making your scheduled repayment temporarily. Or, in other cases, the monthly amount you pay reduces significantly. To obtain this ‘grace,’ you need to work with your loan officer and apply it through appropriate channels. Until then, you need to find a way to make your monthly scheduled payments on time until either a deferment or forbearance takes place.

Difference between Deferment and Forbearance

The distinguishing factor between the two options lies in the responsibility that falls on the borrower to pay up the interest on some types of loans while they are in deferment.

As such, these serve as a convenient way of avoiding default student loans. However, there are other ways of preventing default. But before tackling those, we look at why you need to avoid defaulting on your student loan. 

Consequences of Defaulting Student Loan

Depending on your loan servicer and the type of program under which you take out your loan. Generally, the outcomes can be varied, including the following:

  • Your default is reported to credit bureaus. This has far-reaching repercussions, like damaging your credit score. Hence hindering you from purchasing a house, car, or even getting a credit card.
  • You will no longer be eligible for additional financial aid.
  • Loan holders can take court action against you.
  • Your loan can become accelerated. Which means the total amount borrowed with interest inclusive becomes due at once.
  • You may become unable to trade (buy or sell) assets like real estate.
  • You may become ineligible to change your repayment plan; neither can you apply for deferment or forbearance.
  • You will receive a treasury offset. In which your federal benefit payments and tax refunds are withheld and used to offset the cost of your defaulted student loan.
  • You may incur costs like court charges, attorney fees, collection fees, and other costs associated with the process of debt collection.
  • You may lose a portion of your employer’s remuneration. This is called wage garnishment. The withheld amount is redirected to your loan holder to cover the amount of defaulted student loan.
  • You may have to take several years to get back in good standing with the credit bureaus and have a good credit record.
  • You may not be able to receive your academic transcript from your school until you make full payment of your default student loan.

In some big and small ways, these consequences affect other areas of your life. As such, you want to avoid a default student loan as much as possible. 

But the question is, how?

How to Avoid Going into Default

In many instances, borrowers miss payments. Either due to financial hardship or any other contributing factors. In such cases, we advise contacting your loan servicer immediately. They help you know your options and give you a way out. Mind you; a default is in no parties interest. Hence, your loan servicer will like to help it avoid it as much as possible.

 In the case of federal loans, you can either contact the agency the deals with the billing of your loan, the school you obtained the loan or the servicing organization representing your school. You can get general information from My Federal Student Aid. The information there can also help you avoid falling within the Cohort Default Rate (CDR). This is the percentage of students from an educational institution that have default student loans after threes of completion.

Apart from the above measure, you can also avoid going into the cohort default rate with the following steps:

  • Pay careful attention to your loan and agreement, and ensure you understand it.
  • Make sure you only take out the amount of loan you require to cover the expenses of your college education.
  • Use the internet to track your loans and repayment status.
  • Keep all the necessary documents on file. Some of these document must include:
  • Payment schedules
  • Financial aid offers
  • Promissory notes
  • Both your entrance and exit counseling materials.
  • Total amounts of borrowed student loans
  • Records of monthly payments
  • Contact information of loan servicer
  • Documentations of full payments, etc. 
  • Promptly inform loan servicer of any irregularities in payments.

After taking all these steps, you would have adequately safeguarded yourself from defaulting. But in a worst-case scenario, what if you still default? Find our recommendation for a default student loan and how you can get out of this situation below. 

What to Do in Case You Default

Naturally, you must try to get out of a defaulted student loan as soon as possible. Since the primary cause of most default cases is monetary, looking for a way to get the money does help. However, the loan companies that provide student loans are also aware of this. Hence, they have taken certain steps to help borrowers who find themselves in that predicament. Mostly, an early repayment arrangement plan will help you deal with the default and lots of its consequences.

The consequences can be intimidating, if not worrying. However, you don’t need to allow them to affect your financial future. At Student Loan Resolved, we do not only help you find the ideal student loan forgiveness plan. We also provide you with your options to get out of a default student loan.

There are four primary to get out of your defaulted loan, namely:

  • Loan Consolidation
  • Loan rehabilitation
  • Refinance private student loans
  • Getting help for the defaulted student loan                

Of these options, some may be more practical for most borrowers than others. The final decision lies in the individual financial situation and if you will choose loan rehabilitation, consolidation, or full repayment. Either way, you will need some expert help to navigate these waters.

Loan Consolidation

You can get out of a default student loan by turning the loan into a direct consolidated loan. Hence, you can use a new consolidated loan to pay off one or more federal student loans. To do this, you need to take one of the following steps:

Come to an agreement with your loan servicer to repay the new Direct Consolidation Loan with an income-driven repayment plan.

Make three payments on-time, one after each other on the defaulted loan prior to consolidation.

Loan Rehabilitation

Another favorable option for getting out of default student loan is loan rehabilitation. Starting the process to rehabilitate your loan is pretty straightforward. First, you contact your loan holder. In case you aren’t certain about the details of the loan holder, who they are, contact your school’s financial aid office.

Under the federal loan rehabilitation program, your loan holder requires you to make nine consecutive on-time payments. These payments must follow in the order within ten months, not more than 20 days from the due date each month. Usually, borrowers receive different payment plans for the sums depending on the financial circumstances. 

However, you need to submit a loan rehabilitation income and expenses form. This helps the loan provider to know your earnings and determine the amount of monthly payment you can afford.  

Private Student Loans Refinance

It is possible to avoid a private student loan default when you refinance it. Unlike federal student loans, not all private lenders offer deferment or forbearance options in cases of Delinquency. Because, with private loans, there is nothing like an income-driven repayment option. As such, your options are more limited.

However, you can use refinancing as a means of getting lower monthly payments, depending on your cash flow. You need to keep in mind, though, a longer-term loan implies more fees in the form of interests.

In case this option doesn’t work for you, you can try our bonus recommendation below.

Striking an Affordable deal on Your Student Loan Debt

If all the other options fail, you may still request a sitting with your loan provider to negotiate lower payments. Hence, when an income-based payment doesn’t work for you, you and your lender can work together to determine a fixed range that your budget can afford. In addition, you can try waiving some collection costs and outstanding fees.

Also, in some cases, you can get all your outstanding loans written and even receive a refund for earlier payments. That’s provided you meet the eligibility criteria for a loan forgiveness program. You can read all about it in our blog posts. 

Getting Help with a Defaulted Student Loan

Remember, your loan provider best provides help for your default student loan. This is true both in the case of private or federal student loans. Though we offer you with the necessary information about student loan forgiveness plans and preventing defaults, your lenders are the last stop. Hence, contact them as soon as possible when you get a delinquency or default notice.

NB: Default or delinquency notices from your loan servicer must never be ignored. 

What to do in an Error Default Case

If you are sure your loan was placed in default as a result of some mix-up or error, here is how to the right this wrong.

  • Ask your loan servicer for a statement displaying for payments.
  • If you were approved for deferment or forbearance, demand a confirmation for the dates these two took effect.
  • Provide documentation in case of any incorrect information on the part of your loan provider
  • In coming to your loan payments that don’t reflect on payment statement, supply proof of payment, and demand that the records be set straight to indicate the correct details.
  • Provided you returned to school and file for an in-school deferment, obtain records from your school showing all the dates of no less than half-time attendance. The records need to be thorough and complete. Therefore, you must contact each school you attended after receiving the loan.

These steps should help you resolve any errors leading to wrong default student loans. Some of these issues can be disturbing and time-consuming to fix. The U.S. government has also taken some steps to protect students and loan providers alike. As such, the introduction of some new legislation about loan defaults. Follow our blog to read more on this topic. 


Your best options for dealing with student loan debt are either to qualify for a loan, forgive plans like the public service loan forgiveness, or manage full payment. As much as possible, you should avoid a default student loan and its consequences. Prevention is undoubtedly better than cure in this scenario. 

However, should you honestly believe you can’t fulfill your payment obligations towards your student loan, the options above should suffice to keep you from defaulting. It only takes you to contact your loan provider to discuss your student loan debt options. Whether forbearance, change of repayment plan, or deferral, a chat with your servicer should help you decide the best option for you.

Hopefully, your financial situation will improve, and you will make enough down payments to clear your student loan faster. Until then, you always need to remember that the sooner you confront possible Delinquency or default student loan issue, the better your options are going forward.