As of mid-2023, federal student loan payments have been paused until October 2023, and student loan interest will begin accruing in September 2023.
For individuals who default on their federal student loans, there are three ways to get out of default:
- Repay the amount in full.
- Rehabilitate the loans.
- Consolidate the loans.
The first is obvious; however, it's unlikely someone who has defaulted on their student loans will have the resources to pay them off.
To rehabilitate a student loan, you start by contacting the loan holder, "agree in writing to make nine voluntary, reasonable, and affordable monthly payments (as determined by your loan holder) within 20 days of the due date, and make all nine payments during a period of 10 consecutive months."
For borrowers with multiple student loans, applying to consolidate those loans may be the best option. According to the U.S. Department of Education, you must either "agree to repay the new Direct Consolidation Loan under an IDR (income-driven repayment) plan, or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it."
You also lose access to federal student aid if you have loans in default, so rectifying the default is very important if you plan to return to school and need additional financial aid. To regain eligibility for aid again, you must make six consecutive, on-time payments for the amount due.
