If you have defaulted on a federal student loan, you still have options to resolve the default and even clean up your credit. These options include:
Making payment arrangements. The collection agency to which your account has been assigned, your guarantor, or the U.S. Department of Education can help you establish repayment arrangements. Typically, these plans require that each of your monthly payments at least cover the accruing interest and collection costs on your loans.
Loan consolidation. Under certain circumstances, you can consolidate your defaulted loans. Once your consolidation loan is approved, your credit report will be updated to reflect that your defaulted loans are paid in full, although your credit report will continue to document that you previously defaulted on your loan. You will have to make the required payments on your consolidation loan.
Loan rehabilitation. You must make nine, voluntary, on-time qualifying payments during a 10-month period to rehabilitate a defaulted loan. Your payments will be reasonable and affordable based on your financial circumstances. After making the required payments, your loans will be sold to a lender, the reporting of your default will be deleted from your credit report, and you will have a new loan on which you will be making payments.
Note: You may rehabilitate defaulted loans only once.
USA Funds offers additional information about the options for resolving your default.
Where to Get Help
If you defaulted on a Federal Family Education Loan Program loan, your student loan guarantor now owns your loan and is responsible for collecting payments from you.
To check the status of a defaulted loan guaranteed by USA Funds log in to USA Funds Loan SolutionsSM.
USA Funds, many other student loan guarantors, and the U.S. Department of Education, contract with collection agencies to work with borrowers in default.
If you have a defaulted loan guaranteed by USA Funds and don’t know which collection agency is assigned your account:
- Log in to USA Funds Loan Solutions.
- Contact the Post-Claim Assistance unit of USA Funds’ service provider, Navient (formerly Sallie Mae) at (800) 331-2314.
U.S. Department of Education
If your defaulted loan has been assigned to the U.S. Department of Education:
Some private organizations advertise services to assist borrowers in resolving student loan default for a fee. Before you work with a default resolution firm, first consider the free assistance available from the organizations listed above and be aware that some default resolution firms have been sued by state authorities
for allegedly defrauding student loan borrowers.