Student Loan Default: Consequences and How to Get Out of Default

You default on federal student loans after 270 days without payment. Private student loans can default much faster—sometimes in just 4 to 6 months. Once that happens, your entire balance becomes due, your credit tanks, and collection starts. The government can garnish wages and seize tax refunds. Private lenders must sue first, but the result is the same—aggressive collection until the debt is cleared.

You can fix a default in three ways:

• Rehabilitation — make nine agreed payments to restore good standing.

• Consolidation — replace your defaulted loan with a new one in about 2–3 months.

• Settlement — negotiate a payoff for less than you owe.

You may have heard the terms delinquency and default used interchangeably, but default isn’t the first missed payment—it’s the official point where your loan holder assumes you won’t repay.

Federal and private student loans follow completely different rules once you default. Federal loans are backed by the government, so the Department of Education can collect without going to court. Private lenders don’t have that power—they have to sue you first.

Federal Student Loan Default Rules

You default on federal student loans after missing nine consecutive monthly payments.

Default severely damages your credit, triggers aggressive collection, and cuts off access to new federal loans and forgiveness programs until it’s resolved.

Related: How to Go Back to School With Defaulted Student Loans

After default, your loan is transferred from your servicer to a collection agency. The government can then:

• Garnish your wages through administrative wage garnishment (no court order needed).

• Seize your tax refund or Social Security benefits through the Treasury Offset Program.

• Add collection fees of up to 25% of your balance.

To get out of default, you can:

• Apply for a Direct Consolidation Loan to bring the debt current in about 2–3 months.

• Enroll in Loan Rehabilitation, which clears the default after nine agreed payments.

• Pay in full or negotiate a settlement, though those are less common.

These options restore access to repayment plans, forgiveness programs, and new financial aid.

Related: What Happens If You Defaulted on Student Loans 20 Years Ago

Private Student Loan Default Rules

Private student loans can default much faster—often after 90 to 120 days without payment. Once in default, the lender or debt buyer must sue you in state court to collect. If they win a judgment, they can:

• Garnish your wages (up to 25% of disposable income, depending on state law).

• Levy your bank account or place property liens.

• Add legal fees and court costs to your balance.

Private loans don’t have government recovery programs. There’s no rehabilitation or consolidation. While very few options exist to repair the loan status (only one lender currently lets you refinance defaulted private student loans), your primary choices are to settle the debt, pay in full, or file bankruptcy if collection becomes unmanageable.

In some cases, borrowers wait out the student loan statute of limitations—the period when a lender can legally sue for payment. It’s not rare, but it’s unpredictable. Once that window closes, collection becomes harder to enforce, though the debt can still appear on your credit report.

Related: What Happens In a Private Student Loan Lawsuit

If you’re not sure where your loans are or who’s collecting on them, you can track them down in a few minutes using official tools.

Start with StudentAid.gov. Log in to see every federal loan tied to your Social Security number, whether it’s active or in default, and which servicer or collection agency currently handles it.

If the loan shows as “in default,” check MyEdDebt or call the Default Resolution Group at 1-800-621-3115. They can confirm your balance, list any collection fees, and tell you who to contact to start rehabilitation or consolidation.

For private loans, pull your credit reports from Experian, Equifax, and TransUnion. Defaulted accounts will appear as “charged off” or “in collections,” along with the name of the current lender or collector. You’ll need to contact them directly to verify your balance or negotiate repayment.

You can get out of default by consolidating, rehabilitating, settling, or paying in full. The best option depends on your loan type and how quickly you need results.

Apply for a Direct Consolidation Loan

Consolidation is the fastest way to fix a federal student loan default. It replaces your old defaulted loans with a new Direct Consolidation Loan. Once approved, the default status disappears, and you regain access to repayment plans and forgiveness programs.

It usually takes two to three months to complete. You’ll need to choose an income-driven repayment plan as part of the application, which keeps your new payment affordable and prevents another default.

Related: How to Consolidate Federal Student Loans After Default

Enroll in the Loan Rehabilitation Program

Rehabilitation takes longer—but it cleans your credit report. You agree to make nine monthly payments based on your income, usually much lower than your old payment. Once complete, the government removes the default notation from your credit report and restores eligibility for deferment, forbearance, and forgiveness programs.

Following a rule change, you can now rehabilitate a defaulted loan twice. But if you default again, consolidation or settlement are your remaining paths.

Related: How the Federal Loan Rehabilitation Program Works

Pay in Full or Negotiate a Settlement

If you can afford a lump-sum or your loans are private, settlement may be your best option. Federal settlements are rare and modest—typically removing collection fees or some interest. But private lenders like Navient or National Collegiate will often negotiate for 30%–60% of the balance once the loan has been charged off.

Always get a written settlement letter confirming the payment satisfies the debt in full before sending money.

Related: How to Settle Private Student Loans

Getting out of default can take anywhere from a few weeks to almost a year, depending on the path you choose.

• Consolidation clears federal default in about two to three months. That’s the fastest option because it replaces the old loan with a new one. Once processed, collections stop and your account shows as current.

• Rehabilitation takes nine monthly payments to complete. The process is slower, but the tradeoff is worth it—it removes the default mark from your credit report and restores eligibility for new loans, deferment, and forgiveness programs.

• Settlement can happen in as little as one month, but it depends on how fast you and the lender agree to terms. Private lenders move quicker than federal agencies, especially if the loan has been in default for a while.

• Pay in full is immediate—you’re out of default once the payment clears—but few borrowers can afford it.

Who you contact depends on your loan type and how much support you need.

If your loans are federal, start with the Default Resolution Group (DRG) at 1-800-621-3115 or log in at myeddebt.ed.gov. They can confirm your balance, outline options for consolidation or rehabilitation, and tell you which collection agency is handling your case.

If your loans are private, contact your lender or the collection agency listed on your most recent letter. Ask who currently owns the loan and what options—if any—exist for settlement or payment arrangements.

If you want independent or third-party help, there are a few solid places to turn:

• The Institute of Student Loan Advisors: TISLA is a nonprofit providing free, unbiased guidance on repayment and default recovery.

• Reddit communities: Start with r/StudentLoans for general questions about repayment, forgiveness, and servicer issues. Go to r/StudentLoanDefaulters for real-world experiences with collections, settlements, and lawsuits.

Beyond free and community resources, some borrowers choose professional help when their situation gets more complex. A student loan lawyer isn’t just for court or garnishment. They understand every repayment, forgiveness, and collection rule—and can handle the paperwork and negotiations for you. From verifying ownership to structuring settlements or filing legal actions, they take care of the details borrowers usually struggle with.