Skip to Content

With student loan debt now totaling $1.3 trillion in the United States, the student loan crisis has reached a fever pitch and now affects more than 40 million Americans. To compound the crisis, the Consumer Financial Protection Bureau reports that one in four borrowers are in delinquency or default on their student loans. Student loans are considered in default when a borrower hasn’t made in payment in more than 270 days.

Declaring bankruptcy does not eliminate student loan debt.  And, the federal government has the power to garnish wages, tax refunds and even Social Security to recoup payment.

But what many borrowers don’t realize is that there may be many options available to make student loan repayment more manageable. Here’s what to do if your student loans are in default (or headed in that direction):

Get clear information on your default

If you’re unsure which collection agency holds your loan, how much money you owe or other important details about your student loan debt, contact the Department of Education’s Default Resolution Group at 800.621.3115.

Don’t delay

If you’re in default, the government can garnish 15 percent of your paycheck and tap into your tax refund. What’s more, the longer your loans sit in default, the higher the balances grow with collection fees. Unfortunately, this will damage your credit rating. Contact your loan servicer to explain your situation and discuss options to bring your loans current.

Rehab your loans

If paying the loans in full isn’t possible, student loan rehabilitation may be a good option. Once you make nine consecutive payments, which are based on your discretionary income, the servicer removes the default status. At that time, the loan is considered rehabilitated and may be eligible for other repayment programs.

Consolidate your debt

Loan consolidation allows you to pay off your loans and creates a new direct consolidation loan with a fixed interest rate. First, you must agree to the terms of the new direct loan, including repaying it under an income-driven plan. After three consecutive payments, you can select a different repayment option if income-driven isn’t right for you. Consolidation doesn’t remove the defaulted status from your credit report. But it does zero out old loans and reflects a new loan line item.

woman working on balancing budget

Struggling with Credit Card Debt?

A debt management plan can help:
  • Consolidate monthly payments
  • Lower interest rates
  • Eliminate collection calls

Related Posts

5 Awesome Summer Jobs for Teachers

If you’re a teacher, you know summer vacation isn’t the life of luxury many people assume it is. In fact, it can be extremely stressful to not receive a regular paycheck during those months off. While many teachers plan and save for summer during the school year, it’s still challenging to stretch approximately nine months […]

Read More

What Parents Need to Know About Student Loans

Sending a child off to college is a proud moment for any parent. But today’s college education comes with a hefty price tag. For many families, student loans are the only way to pay for higher education. And for parents, a lot has changed in the world of student loans since they were in school. […]

Read More

Easy Ways to Save on College Costs

As students prepare to descend on college campuses across the country, it’s the perfect time to discuss saving on college costs. While the cost of tuition is a non-negotiable, there are many more ways you can save on the overall costs related to receiving a college degree. Here are several ways you can save on […]

Read More

Call 866-528-0588

Or schedule a call now
Please complete the required fields to continue.
Now Later
By requesting a review you are agreeing to communications from Take Charge America via email, phone and SMS messaging. You can opt out at any time.