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When you don’t make payments on a student loan, your loan could end up in default. If you’ve defaulted on a student loan, there are a few ways that could help you recover — such as refinancing your loans.
If you’re looking to refinance defaulted student loans, here’s what you should know:
- Is refinancing an option for student loans in default?
- How to recover from student loan default
- How to avoid student loan default
Is refinancing an option for student loans in default?
Whether you can refinance your student loans when they’re in default depends on what type of student loans you have — federal or private — as well as your financial situation.
Federal student loans in default
If you miss payments on a federal student loan, your loan will be considered delinquent. After a certain amount of time in delinquency, your loan could go into default.
- Direct Loans will go into default if you make no payments for 270 days.
- Perkins Loans can end up in default if you don’t make a payment by the due date. The exact period of time you have before a Perkins Loan goes into default depends on the holder of the loan.
There are also several consequences that can come with federal student loan default, such as:
- Immediate repayment: Your entire unpaid balance as well as any accrued interest will be immediately due.
- Loss of benefits: You’ll no longer be eligible for additional federal aid or federal benefits.
- Loss of earnings: Your wages might be garnished, and tax refunds could be withheld.
- Legal repercussions: You could be sued by the holder of the loan.
- Fees: You could be charged fees associated with collection, such as court costs or attorney’s fees.
Keep in mind that you might have a hard time qualifying for refinancing while in default, though some lenders could be willing to work with you if you have a creditworthy cosigner. However, you might have to pursue other options to get out of default before refinancing.
If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for you. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.
Lender | Fixed rates from (APR) | Variable rates from (APR) | Loan amounts | Min. credit score | Cosigners allowed |
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![]() | 4.85%+ | 5.3%+ | $10,000 up to $250,000 (depending on degree) | 720 | Yes |
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![]() | 6.8%+1 | 7.06%+1 | $10,000 to $500,000 (depending on degree and loan type) | Does not disclose | Yes |
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![]() | 6.99%+2 | 6.99%+2 | $5,000 to $300,000 (depending on degree type) | Does not disclose | Yes |
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![]() | 6.0%+5 | 8.03%+5 | $7,500 to $200,000 | 700 | Yes |
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![]() | 5.08%+3 | 5.28%+3 | $10,000 to $250,000 | 680 | Yes |
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![]() | 5.9%+4 | 8.12%+4 | $5,000 - $250,000 | 670 | Yes |
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![]() | 6.94%+ 7 | N/A | Up to $300,000 | 670 | Yes |
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![]() | 4.49%+ | 5.02%+ | Up to $300,000 | 700 | Yes |
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![]() | 5.75%+ | N/A | $10,000 up to the total amount of qualified education debt | 670 | Yes |
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![]() | 5.79%+ | N/A | $7,500 up to $250,000 (depending on highest degree earned) | 680 | Yes |
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Compare personalized rates from multiple lenders without affecting your credit score. 100% free! |
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures | 8Nelnet Bank Disclosures |
Private student loans in default
In many cases, a private student loan is considered to be in default after missing payments for 120 days, after which it could be sent to collections.
However, keep in mind that the rules for private student loan default vary depending on the lender. If you think you might miss payments on a private loan, it’s a good idea to reach out to your lender to see exactly what triggers a default status and if any assistance is available to you.
However, keep in mind that after 120 days of delinquency, many lenders will charge off private loans and send them to collections. If this happens, the lender might not be willing to help you. Be sure to reach out to your lender before your loan reaches this point to avoid this.
Regardless of which strategy you choose to get out of student loan default, you’ll likely still have to repay your entire loan balance. You can estimate how long it’ll take to pay off your student loan debt using the calculator below. Use the slider to see how increasing your payments can change the payoff date.
Enter loan information
If you increase your payments by $ monthly on your $ loan at %, you will pay $ a month and pay off your loan by Jan 2021.
Does refinancing make sense for you?
Compare offers from top refinancing lenders to determine your actual savings.
Checking rates won’t affect your credit score.
Learn More:
- Statute of Limitations on Private Student Loans: State Guide
- Applying for Student Loan Unemployment Deferment
How to recover from student loan default
There are a few ways to recover from student loan default, depending on whether you have federal or private student loans.
Loan rehabilitation
Best for: Borrowers who can’t afford their federal loan payments
With this option, you must agree to make nine voluntary, reasonable, and affordable monthly payments within 10 consecutive months. Your payments will be equal to 15% of your annual discretionary income divided by 12.
Depending on your income, your monthly payment could be as low as $5 per month with federal student loan rehabilitation.
After you’ve made all nine payments, the Department of Education will request that the credit bureaus remove the default from your account, which might help boost your credit score.
Keep in mind that some private lenders also offer rehabilitation with their own conditions and terms.
Check Out:
- Student Loan Rehabilitation vs. Consolidation: Getting Out of Default
- How to Get Student Loan Repayment Help
Loan consolidation
Best for: Borrowers who have only recently defaulted on their loan and haven’t had their wages garnished.
Another strategy for getting out of federal student loan default is to consolidate your loans into a Direct Consolidation Loan. To be eligible, you must either make three consecutive, on-time, voluntary monthly payments on your defaulted loan, or agree to sign up for an income-driven repayment plan after consolidation.
Keep in mind that if your defaulted loan is currently being paid via wage garnishment or court order, you won’t be eligible for loan consolidation unless the wage garnishment has been lifted or the judgment is vacated.
Learn More: Private Student Loan Consolidation
Repayment in full
Best for: Borrowers who can afford to repay their entire loan balance or who can find financing to do so.
You also have the option to fully repay a federal or private student loan in default. However, this is likely impractical for many borrowers.
Check Out: Can You Pay Your Student Loans With a Credit Card?
Student loan refinancing
Best for: Borrowers who have defaulted in the past or who have a creditworthy cosigner
Refinancing your defaulted student loans — which could help lower your interest rate or reduce your monthly payment — is another potential way to recover from default. However, since private lenders will look at your credit and financial history to determine creditworthiness, you might have a hard time qualifying if you’re currently in default.
If you’re struggling to get approved, consider:
- Applying with a cosigner: Having a creditworthy cosigner could improve your chances of qualifying and might even get you a lower interest rate. Just remember that if you can’t manage your payments, your cosigner will be responsible for repaying the loan.
- Refinancing in the future: It’s possible that you might not be able to qualify for refinancing with a defaulted loan. In this case, it could be a good idea to pursue another option to get out of default, then build your credit before applying for refinancing in the future.
You can use our calculator below to see how much you can save by refinancing your student loans.
Step 1. Enter your loan balance
Step 2. Enter current loan information
Step 3. Enter your new loan information to start calculating your savings
If you refinance your student loan at % interest rate, you can save will pay an additional $ monthly and pay off your loan by . The total cost of the new loan will be $.
Does refinancing make sense for you?
Compare offers from top refinancing lenders to determine your actual savings.
Checking rates won’t affect your credit score.
Learn More: Federal Student Loans and COVID-19: What You Need to Know
How to avoid student loan default
The best way to deal with student loan default is to avoid it altogether. If you’re having trouble making your student loan payments, here are several options that might help keep your loans out of default:
- Forbearance: With student loan forbearance, you can temporarily pause your loan payments. If you have federal student loans, you might qualify for forbearance under certain circumstances, such as financial hardship, medical bills, changes in employment, or reasons approved by your loan servicer. Some private lenders also offer forbearance options. Keep in mind that depending on the type of loan you have, interest could continue to accrue during the forbearance period.
- Deferment: Like forbearance, student loan deferment is a way to postpone your loan payments for a period of time. If you have federal loans, you might qualify for deferment in certain situations, such as if you’re undergoing cancer treatment, facing economic hardship, or returning to school. Some private lenders offer deferment in specific circumstances as well. Note that interest might continue to accrue while your loans are in deferment.
- Changing repayment plans: Federal student loans as well as some private student loans offer repayment plans that can help make monthly payments more affordable. For example, if you have federal loans, you might be able to sign up for graduated repayment, extended repayment, or income-driven repayment. Certain private lenders — such as RISLA — provide similar options.
- Federal consolidation: You don’t have to be in default to consolidate your federal loans into a Direct Consolidation Loan. With this option, you could extend your repayment term up to 30 years, which can lower your monthly payments. Just keep in mind that having a longer repayment term means you’ll pay more in interest over time.
- Private refinancing: If you’re struggling to afford your payments on federal or private loans, you could also consider refinancing them with a private lender. Depending on your credit, you might qualify for a lower interest rate, which could save you money on interest charges and even help you pay off your loan faster. Or you could opt for a longer repayment term to reduce your monthly payments — though remember that you’ll pay more in interest this way.
If you decide to refinance your student loans, be sure to consider as many lenders as you can to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.
See Your Refinancing Options
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Keep Reading: Student Loan Deferment vs. Forbearance: How to Choose