Defaulted Student Loan Forgiveness: All Your Questions, Answered

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

In the past two years, the U.S. Department of Education has cleared the balances of hundreds of thousands of dollars owing over $25 billion in federal student loan debt. The Biden administration is prone to authorize debt cancellation for those more people before the payment pause ends.

The common thread among all those borrowers? Almost all of their accounts were in good standing. The Education Department rarely wipes out the balances of borrowers in default.

If you’re hoping to get any student debt forgiveness, you’ll likely want to bring your loans current. Doing that will give you the best shot at participating in any debt relief announced by the White House.

Ahead, learn more about forgiveness opportunities for student loans in default.

Learn More:

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

Federal student loan 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 must 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.

Forgiveness programs and eligibility

  • Borrower defense to repayment cancels the loans you borrowed to attend a school that defrauded you.* Delinquent and defaulted loans are eligible for loan cancellation. Check the borrower to repayment school list.
  • Public Service Loan Forgiveness erases your remaining balance tax-free after a decade of working full-time for the government or nonprofit before you qualify. Any payments made on loans in default — wage garnishment, tax refund offset, and so on — do not count towards the 120 monthly payments needed to qualify for the program. Read more about PSLF changes.
  • PSLF Limited Waiver increases your payment count for PSLF by giving you credit for student loan payments that were late, for less than the full amount, made under the wrong repayment plan, or made toward Federal Family Education Loans. Payments made while the loans were in default do not count toward the program. Read more about the Limited PSLF Waiver.
  • Income-driven repayment forgiveness wipes out your balance after at least 20 years of payments under one of the four income-driven repayment plans: IBR, ICR, PAYE, and PAYE. Payments made while the loans were in default do not count toward the program. Read more about one-time IDR payment credit adjustment.
  • IDR Waiver increases your payment count toward IDR forgiveness and PSLF by giving you credit for payments made under different student loan repayment plans. It also pushes you closer to forgiveness under both programs if you were a victim of forbearance steering — i.e., kept in long forbearances instead of being put into an IDR plan. Payments made while the loans were in default do not count toward the program. Read more about the IDR account adjustment.
  • Total and Permanent Disability Discharge forgives your balance if a permanent mental or physical disability prevents you from working. Delinquent and defaulted loans are eligible for loan cancellation. Read more about disability student loan forgiveness.

* Borrower defense only applies to Direct Loans. Borrowers with FFEL and Federal Perkins Loans will need to consolidate before submitting a borrower defense claim.

A recent study of the student loan default rate shows that one out of every ten Americans has defaulted on a student loan, and nearly 8% of all student loan debt is in default.

How do I get defaulted student loan forgiveness?

Earlier this year, the Biden administration announced that before the pandemic pause ends, the Education Department will grant defaulted borrowers a “fresh start“ on repayment by bringing their accounts current. If you need to fix your student loan situation before then, the department offers two processes to dig out of default: 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 toward 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 must 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 take out a new loan to repay 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 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. But 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

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 qualify 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 your loans are in default, you will have 90 days to pay the full amount. Part of the settlement may include removing some of the collection fees and interest 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 with all three credit bureaus, which may cause your credit scores to drop temporarily. But 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, and so on.) affects 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 review your loans to find the best path to get you back in repayment and on the track toward loan forgiveness.

UP NEXT: Student Loan Forgiveness Programs

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I'm a student loan lawyer that helps people like you with their federal and private student loans wherever they live.

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