Loans in Default

 If a federal student loan is in default, it may be eligible to be brought back into good standing with the federal lender through a rehabilitation process.  

Student borrowers have several options in case of a default. Although not very appealing, they will have some long-term effects. Rehabilitation requires the borrower to work with lenders or services to setup a monthly payment plan where nine complete payments are made in a ten-month period in order to help bring the loan out of default and back in good standing with the Department of Education. This must be done for each individual loan that is in a defaulted state.

Defaulted loans may also be brought out of default by consolidation. Note that by consolidating defaulted loans, the default will remain on credit for 7 years.