Can Defaulted Student Loans Be Forgiven?

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Stanley Tate

#1 Student Loan Lawyer

Updated on October 2, 2022

Can defaulted student loans be forgiven? Most programs require you first get out of default, then apply for forgiveness.

Millions of federal student loan borrowers remain in default after nearly two years of pandemic relief, which ends in May 2022. At that point, nothing prevents defaulted borrowers from having their wages garnished and tax refunds seized by the Treasury Department through a program used to collect overdue student loan debts. Senator Elizabeth Warren and other policymakers are pushing President Biden to prevent that from happening by approving defaulted student loan forgiveness.

Ahead, learn your options for student loan default forgiveness.

Can you get student loan forgiveness if you are in default?

Borrowers who are permanently disabled or attended a sham school remain eligible for student loan forgiveness even if their loans are in default. But public service workers and teachers have to be out of default and in good standing before they qualify for the Teacher Loan Forgiveness or Public Service Loan Forgiveness Program.

There aren’t any formal private defaulted student loan forgiveness programs. But some lenders will write the debt off if the primary borrower dies or can no longer work due to mental or physical disability. Typically, the best option to deal with private student loans after they default or are charged off is to negotiate a settlement.

How do I get defaulted student loan forgiveness?

Borrowers who default on their federal loans can use two processes to dig out: rehabilitation and consolidation. Once in good standing, their formerly defaulted debt becomes eligible for student loan forgiveness programs.

Getting out of default with rehabilitation

The student loan rehabilitation program gives borrowers one-shot to get federal student loans out of default. Once enrolled, borrowers have ten months to make nine payments towards the defaulted loans. After all program requirements are met, the loans are returned to good standing and transferred to a student loan servicer. From there, you can work with the new company to start the pathway towards loan forgiveness.

Following a recent change to the student loan collection process, most borrowers in default will work with the Default Resolution Group to enroll in the loan rehabilitation program.

Also, borrowers who enroll in the rehab program during the student loan freeze will get credit towards the nine required on-time payments — even if they never pay. But once the payment pause ends, they’ll need to make any remaining payments to complete the program.

Learn More: Student Loan Rehabilitation CARES Act

Getting out of default with consolidation

Student loan consolidation allows borrowers to borrow a new loan to pay off the defaulted loans. Unlike rehabilitation, consolidation isn’t a one-time opportunity. A loan can be consolidated more than once if there’s another federal loan to consolidate with it. (FFEL Consolidation Loans can be consolidated into a Direct Consolidation Loan even if it’s the only loan.)

Visit the Federal Student Aid website,, to start the consolidation application process.

Learn More: How to Consolidate Defaulted Student Loans

Will Congress approve student loan default forgiveness?

Progressive lawmakers have pushed for President Biden to use executive action to cancel $10,000 per borrower. Pres. Biden has resisted so far. But with mid-term elections looming next November, blanket cancellation could be near.

If that happens, defaulted loans directly owned by the U.S. Department of Education would be wiped away. However, government-backed bank loans made under the FFEL Program are at risk of being excluded. Borrowers can take matters into their own hands by consolidating FFEL and Perkins Loans into a Direct Consolidation Loan.

While there’s no guarantee that the strategy will work, it puts you in the best position to receive any potential student loan relief.

Learn More: $10,000 Student loan Forgiveness Program

Available Student Loan Forgiveness Programs

Since Joe Biden took office, the Department of Education has made targeted forgiveness a priority. Nearly $10 billion in student loan debt has been wiped away for more than 500 thousand borrowers in the past year. The beneficiaries include those who were defrauded by failed for-profit schools, soldiers deployed to war zones, permanently disabled people, and public servants.

If you have not benefited from this parade of relief, there are still student loan forgiveness programs you can benefit from:

  • Repayment plan forgiveness forgives your loan balance after making at least 240 monthly payments under an income-driven repayment plan. Depending on the plan you choose, your payment amount will be capped at 10-20% discretionary income, which is based on your family size and adjusted gross income.

  • Public Service Loan Forgiveness (PSLF) eliminates the balance owed on Direct Loans if you work full-time for the government or nonprofit. Borrowers with Federal Family Education Loans will need to consolidate the loans into the Direct Loan Program to meet the program’s eligibility requirements. Learn how to consolidate student loans for PSLF.

  • Teacher Loan Forgiveness provides nearly $20 thousand in loan cancellation for educators who work in schools located in low-income communities.

  • Total and Permanent Disability Discharge cancels your debt if the SSA, VA, or doctor certifies that a physical or mental impairment prevents you from working. This type of debt forgiveness is tax-free.

Should you get out of default?

There are a lot of benefits to getting student loans out of default. You can protect your paycheck from wage garnishment, regain eligibility for FHA Loans, financial aid, deferment, forbearance, and start qualifying for loan forgiveness. But there are three drawbacks:

  • Settlement is no longer an option. If you agree to a settlement on your federal student loan while you are in default, you will have 90 days to pay the full amount. Part of the settlement may include having some of the collection fees and interest removed from your balance.

  • The loans will appear on your credit report. Many borrowers have been in default for so long that their student loans have been removed from their credit reports. Getting out of default either through rehabilitation or consolidation will cause the loans to reappear on your report, which may cause your credit score to temporarily drop. However, the delinquency and default status should not return.

  • The payment amount may increase. While you’re in default, your whole financial situation (medical bills, cost of living, child support, etc.) is factored into your monthly payment. But when you return to good standing, your bills no longer matter.

Learn More: Default Student Loan Assistance

Can't wait on defaulted student loan forgiveness?

There’s a chance blanket debt cancellation happens, and defaulted student loan forgiveness becomes a possibility. But until it happens, the federal government can garnish your wages, and seize your income tax refund and Social Security benefits. Explore your repayment options to stop that from happening to you.

If you want help choosing the right strategy for you, schedule a free 10-minute call with me today. We’ll go over your loans to find the best path to get you back in repayment and on the track towards loan forgiveness.

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