Defaulted Student Loans

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Information on Defaulted Student Loans

In order to obtain a federal student loan, a student must sign a promissory note which is a binding agreement between the student and the Department of Education. This promissory note will detail the repayment terms as well as the various options the student will have in order to fulfill these repayment terms. Upon a student graduating or if the student stops attending classes for a semester, the student will then have six months of grace period time. With this grace period, the student is not obligated to make any payments on their loans. Once the six month time frame is up, the lender will expect payment. If the student does not make payments on the loans for 270 days, at any point during the repayment term, the lender will place the student in a default status. Unfortunately, a defaulted status can be very damaging to your credit. It can affect your credit score as well as will not be removed from your credit report for many years even if you have gotten yourself out of the defaulted status. As well as impacting your credit score in a negative manner, if you are in a defaulted status, you will be prohibited from taking out more student loans and/or placing your loans on a forbearance. Getting yourself out of default can take months at a time. Typically to get out of default it will take 9-12 months and until you have completed that time frame, you will not be able to obtain any more loans which can potentially affect you from furthering your education.

Once your lenders have placed you in a defaulted status, they will sell your loans off to a collection agency. Of course, dealing with collection agencies is not the most ideal situation to be in. They will hound you with calls, leave threatening voicemails, etc. Now that your loans are with a collection agency, they will begin tacking on their collection fees in addition to the original amount of your student loans which in turn can make it difficult for you to understand where your money will be going. Many students believe once they begin paying the collection agency that they are paying off their student loans when in fact the collection agency is applying their money to their fees, thus, not impacting the principal or interest of the student loans the student had a balance for. And although this may seem unfair, the collection agencies are permitted to charge reasonable fees as a commission for their services.

Dealing with a collection agency in itself is certainly a hassle, but the consequences of not paying your student loans does not stop there. When falling into default with your federal student loans, the Department of Education is able to have a wage garnishment order placed at your place of employment until your student loans are paid off. Typically the garnishment orders are for 15% of your paycheck which can cause an extreme burden upon you, because at this point, your options are very minimal. A rehabilitation program is the main option you have at resolving the wage garnishment, but even with the rehab program, you will continue to have your wages garnished for some time. AS well as having your wages garnished, you are subject to having your taxes garnished. The Department of Education will refer your account to the IRS to offset any tax refund you may be receiving. The biggest issue with this, prior to filing your taxes, an account cannot see if your taxes will be garnished. Unfortunately, although it may seem as an extreme injustice, the IRS fully has the right to do so. This can become an extremely stressful situation, but there are certain ways to free yourself of the defaulted status before it ever gets to the garnishment process.

A rehabilitation program is one course of action to take to free yourself from a defaulted status. Going through a rehabilitation program entails you making nine consecutive income based payments and once you have completed the nine months, the default status is removed from the loan. If one payment is missed, then the rehabilitation program must start from the beginning, discrediting any payments you may have made and you will be required to still make nine consecutive payments. An alternative route to having the lender remove the default status from your loans is consolidation through the William D. Ford Direct Loan program. All your loans will be paid off and consolidated into one brand new student loan. This brand new loan will be in good standing and you will a few options in regards to repayment options. You may be eligible for a forgiveness program but that will all be dependent on your factors of income, family size and expenses. Both of these options, rehabilitation and consolidation, have their pros and cons but both offer assistance out of a defaulted status.

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"Before I came across Student Loan Help Info, I was struggling to pay $273 every month towards my student loans. A friend of mine referred me to this place and I was a little weary at first. The woman I spoke to was very helpful and informative, so I decided to move forward and they helped me get into a $0 monthly payment. Now my student loans are one less thing I worry about."
Roger P.


"Hi! I am Jessica. I graduated in 2010 with all the hope to build a career in teaching. My loans totaled over $40,000. I had a job at the time and didn’t make a lot of money so supporting my two kids wasn’t easy. I started falling behind with my payments and eventually fell into default. Luckily, I found Student Loan Help Info through an online search, and they were able to help get me out of default and into a forgiveness program. I couldn’t be happier!"
Jessica M.


"I have been disabled for quite some time now so I haven’t been able to work and pay my student loans off. I came across this student loan assistance company and the representative was very knowledge. Since I am disabled, I was able to get all of my loans discharged. I am so thankful I made the call."
Mitchell T.

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