What Is the Default Resolution Group?

Once you default, your student loan servicer sends your loans to the US Department of Education’s Default Resolution Group, which services your loans until you get out of default. The Group will also handle collections on its own or send your defaulted student loans to a private collection agency. Once there, your loans will start racking up collection fees, your wages can be garnished, and your tax refunds and Social Security Benefits can be taken, among other consequences.

When you default on federal student loans, you lose access to:

• student loan forgiveness programs like Public Service Loan Forgiveness and repayment plan forgiveness after 20/25 years of monthly payments (but you’re still eligible for Total and Permanent Disability Discharge)

• income-driven repayment plans (IBR, PAYE, REPAYE, etc.)

• deferment and forbearance

• new federal student aid

• home loans from the Federal Housing Administration (FHA mortgages)

You can restore those benefits by bringing your defaulted student loan debt back into good standing.

There are two main options to get out of student loan default:

1. loan consolidation and

2. loan rehabilitation.

Loan Consolidation

Student loan consolidation helps you get out of default fast. You’re eligible if you’re not under an active wage garnishment and you have another federal loan to include in the consolidation with your default loan. Some borrowers who previously consolidated might be eligible to consolidate a second time if their loan was made under the Federal Family Education Loan Program (FFELP).

You can apply for loan consolidation by contacting the company that has your loans (DRG or collection agency) and agreeing to make three full, on-time consecutive payments. You can also apply for free at studentaid.gov. When you submit your application, you’ll need to agree to make payments on an income-driven repayment plan.

The interest rate for your consolidation loan will be based on the weighted average of the loans you include in the consolidation.

Learn More: How to Consolidate Student Loans in Default

Loan Rehabilitation

Loan rehabilitation takes three times longer to get out of default. So if you need federal financial aid to go back to school or need to clear CAIVRS to buy a home, loan rehabilitation shouldn’t be your first option. To qualify, you must agree to make nine affordable monthly payments consecutively over 10 months. Your payment amount will either be based on the adjusted gross income from your federal tax return or your monthly income and expenses.

You’re allowed to rehabilitate your federal loans once. So after you get out of default, you should enroll in an income-driven repayment plan to keep your loan payments near the same amount you were paying under the program.

If your loans are with a collection agency, you have to contact that company to apply for the loan rehabilitation program.

Settlement is an option to get out of default and waive some of the collection fees and accrued interest. This route isn’t guaranteed. Your loan holder doesn’t have to accept your offer. It’s also a costly option. Unlike private lenders, the federal government doesn’t accept settlements for pennies on the dollar. You may save only 10-15%. Plus, you have to pay the agreed amount within 90 days.

Bankruptcy is another option to get rid of your defaulted debt. But you have to file an adversary proceeding and prove that loan repayment causes you an undue hardship. Because the federal government offers so many options for affordable payments and loan forgiveness, it’s typically difficult to prove federal loans cause undue hardship.

In my experience, in the battle of loan rehabilitation vs. consolidation, the impact on credit score is about the same. Under both options, borrowers typically see their credit scores improve soon after they get out of default.

What if my student loan disappeared from my credit report? Many student loan borrowers defaulted so long ago that their loans no longer appear on their credit reports. If you rehabilitate or consolidate, the balances will reappear on your credit report. But the negative payment information won’t return.

​You may contact Default Resolution Group via:

• Phone call: You can call DRG to get the contact information for the collection agency that has your loans or to discover your options to get out of default at 800-621-3115 Monday through Friday, 8 a.m. to 9 p.m. ET. You can also ask the representative to check the National Student Loan Data System to confirm whether you have any other loans in default with a guaranty agency. Borrowers who need TTY services can call 1-877-825-9923.

• Mail: You can mail paperwork to US Department of Education, PO Box 5609, Greenville, TX 75403-5609.

• Web: You can also view your loan balance by using myeddebt.ed.gov. You can also use MyEdDebt to make monthly payments.

If you want to go over your options, schedule a call with me. I’ve got years of experience helping people like you with their student loans.

Reach out. I can help you find a way to get out of default while saving the most money and preserving your eligibility for loan forgiveness.