How to Remove Defaulted Student Loans
Student loans most often are federal loans. There are some private student loan lenders, such as Citigroup, but for the most part the Department of Education oversees and finances student loans. If you've defaulted on these loans, you must face the consequences and work toward repayment. Only in the most dire of circumstances can student loans be forgiven.
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Things You'll Need
- Copies of student loan statements
- Credit report
- Contact information for lender
Instructions
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Pull a current copy of your credit report. See Resources for a free copy. Review the trade lines on your report and find your defaulted student loans. The report will tell you how much is outstanding, when the last payment was received, your full payment history and when the account was open. If you have multiple loans, add up all the balances--you'll need to pay this full amount to remove these loans.
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Consider a self-designed repayment plan before trying to negotiate with your lender. Review your monthly budget and look for areas to cut back. Make only essential purchases to free up extra cash to put against your student loan balances. You'll need strict discipline to execute a self-designed repayment scheme.
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Contact your lender if you're unable to make your minimum payments. You will not be eligible for deferments or forbearance if you've already defaulted, but you can work with a payment counselor to adjust fees and interest rates. This will make your monthly payment more manageable.
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Use any other available funds to bring your accounts out of default. Use savings accounts, retirement funds, investments, CDs (certificates of deposit) or other assets. Bringing your accounts current is the first step toward repayment.
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Set a repayment timetable. Calculate exactly how much you'll need to pay and for how long and set this on your calendar--use it for motivation. Student loans are difficult to pay down and nearly impossible to remove while still outstanding.
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File bankruptcy as a last resort only. In order for your loans to be forgiven in bankruptcy court, you'll need to prove a permanent inability to repay the loans--not just a temporary inability. This can be difficult to prove and often is only granted to those with debilitating and permanent injuries.
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References
Resources
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