Defaulted Student Loan Forgiveness: All Your Questions, Answered

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Stanley tate

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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 next February. 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, I'll break down everything you need to know about 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 Public Service Loan Forgiveness or Teacher Loan Forgiveness Programs.

There are no 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 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.

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 strategy will work, it puts you in the best position to receive any potential student loan relief.

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:

Should you get out of default?

There are a lot of benefits to getting student loans out of default. You can protect your money from being seized, 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. The one time you can get some of the collection fees and interest removed from your balance is by negotiating a federal student loan settlement while in default.
  • 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.

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, income tax refund, and Social Security benefits. You can stop that from happening by getting out of default either through consolidation or loan rehabilitation.

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.

UP NEXT: Get Out of Student Loan Default, Clear CAIVRS, Get a Mortgage. Here's How.

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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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