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