Back Into Repayment After Student Loan Default

How to Get Back on Track with Student Loan Repayment After Default

Defaulting on your student loans can be stressful, but you’re not stuck forever—and getting back into good standing is easier today than it was in the past. Federal programs like Fresh Start, updated rehabilitation rules, easier consolidation processes, and new repayment options like the SAVE Plan give borrowers more pathways to recovery than ever before. This guide explains exactly what happens when you default, how to get out of default, and what steps to take once you’re back in good standing.

What Happens When You Default?

Federal student loans enter default after roughly 270 days (9 months) of missed payments. When this happens, several consequences can occur:

• Damage to your credit score
• Wage garnishment
• Tax refund or Social Security offsets
• Loss of eligibility for deferments, forbearance, and income-driven repayment (IDR)
• Collection fees and aggressive collection activity

The good news: you have multiple ways to reverse default and rebuild your eligibility for federal repayment plans and forgiveness programs.

Option 1: Fresh Start (Limited-Time Opportunity)

For payoff strategies and ways to manage balances over time, take a look at our comprehensive section on Student Loan Debt.

Fresh Start is a temporary program from the U.S. Department of Education allowing borrowers with defaulted federal student loans to:

• Return to current status immediately
• Regain eligibility for financial aid and federal benefits
• Stop collections like wage garnishment and tax refund offsets
• Enroll directly into repayment without consolidating or rehabilitating first

Fresh Start is available for a limited time (currently through September 2026 unless extended). It is the fastest and easiest way out of default.

How to enroll in Fresh Start:

• Call the Default Resolution Group at 1-800-621-3115
• Ask your servicer to place you into Fresh Start status
• Choose a repayment plan—SAVE is typically the lowest payment option

CollegeWhale Tip: If you qualify for Fresh Start, use it. It restores your standing instantly—no waiting, no paperwork, no 9-month rehab requirement.

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Option 2: Loan Consolidation

Direct Consolidation allows you to combine your federal loans into one new federal loan, immediately removing the default status.

How Consolidation Works

• You apply for a Direct Consolidation Loan online.
• Defaulted loans are paid off and replaced with a new loan.
• Collections (including garnishments) stop once consolidation completes.
• You must choose an eligible repayment plan—income-driven repayment (IDR) is required.

Pros of Consolidation

• Fastest non-Fresh Start path out of default
• Immediate eligibility for IDR plans like SAVE
• One loan, one servicer, one monthly payment

Cons of Consolidation

• Any collections that already happened (garnishment, tax offset) will not be refunded
• Default history remains on your credit report (though the loan becomes current)

CollegeWhale Tip: Consolidation works best for borrowers who need a quick exit from default or who prefer a single, simple payment.

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Option 3: Loan Rehabilitation

Rehabilitation brings your loan out of default by making a series of on-time monthly payments—typically based on your income.

How Rehabilitation Works

• You contact your loan holder or collection agency and request rehabilitation.
• Your monthly payments are calculated based on your income and family size.
• You make 9 on-time, voluntary payments within 10 months.
• Once complete, your loan returns to good standing.

Pros of Rehabilitation

• Default status is removed from your credit record
• Eligibility is restored for federal aid, deferments, forbearance, and IDR
• Collections stop once rehabilitation is complete

Cons of Rehabilitation

• It takes months—not immediate like Fresh Start or consolidation
• You can only rehabilitate a defaulted loan once
• Garnishment may continue until enough rehab payments are made

CollegeWhale Tip: Rehabilitation is the only method that removes the default notation from your credit report. If rebuilding credit is a priority, rehab may be the stronger choice.

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Private Student Loan Default

Private student loans follow completely different rules. They do not offer Fresh Start, consolidation, or rehabilitation. Each lender sets its own policies.

If You’re in Private Loan Default

• Contact the lender or collection agency immediately
• Request a reduced payment plan or settlement
• Ask whether temporary hardship forbearance is available
• Document all communication in writing

CollegeWhale Tip: Private lenders often negotiate when borrowers stay in contact. Silence makes collections harsher.

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Consolidation vs. Rehabilitation: Quick Comparison

Feature	Consolidation	Rehabilitation
Speed	Fast – usually a few weeks	Slow – 9–10 months
Does Default Come Off Credit?	No	Yes
Immediate Stop to Collections	After consolidation completes	Not immediately; improves over time
Future Eligibility	Restored immediately	Restored after completion
Can You Use It More Than Once?	Limited	No (only once per loan)

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After You Exit Default: What to Do Next

1. Enroll in the SAVE Plan (Strongly Recommended)

The SAVE Plan is currently the most affordable IDR plan:

• Low or $0 monthly payments for many borrowers
• Prevents unpaid interest from growing your loan
• Offers faster forgiveness for small balances

2. Rebuild Your Credit

Even after curing default, credit may take time to rebound. Make consistent on-time payments going forward.

3. Check Eligibility for Loan Forgiveness Programs

• Public Service Loan Forgiveness (PSLF)
• Income-Driven Repayment Forgiveness (IDR Forgiveness)
• Teacher Loan Forgiveness

4. Set Up Autopay

Autopay helps ensure you never fall behind again and may give you an interest rate discount.

5. Keep in Contact With Your Servicer

If your income changes or hardship occurs, update your servicer—never ignore payment issues.

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Your “Get Out of Default” Checklist

• ✔ Check if you qualify for Fresh Start
• ✔ Choose your path: Fresh Start, consolidation, or rehabilitation
• ✔ Review your income and family size for IDR eligibility
• ✔ Keep documentation of all communication with servicers
• ✔ Enroll in the SAVE Plan once your loan returns to good standing
• ✔ Set up autopay and budget for monthly payments
• ✔ Explore PSLF or other forgiveness options if eligible

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Defaulting on your student loans is overwhelming—but you have multiple paths to recover. Whether you choose Fresh Start, consolidation, or rehabilitation, all three options can return your loans to good standing and restore access to affordable repayment plans.

The most important step is taking action now. The sooner you begin the process, the sooner you can rebuild your financial stability, protect your credit, and regain control of your student loan repayment journey.