How to Resolve a Defaulted Student Loan
A student loan in default affects your credit score and will prevent you from receiving further financial aid. It is important to resolve any past-due student loans. Many student loans that remain in default are referred to collection agencies. To resolve a defaulted student loan, you can repay the loan in full. There are additional options for people who will need to make monthly payments or who can't afford to make any payments.
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Instructions
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Contact the lender to learn the status of your loan. If your student loan is through the U.S. Department of Education, call 877-557-2575. The representative will ask for your name, address, date of birth and Social Security number. If your loan has already been referred to a collection agency, the lender will inform you of this and will give you the contact information. Call the agency to make arrangements for resolving the defaulted student loan.
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Inquire about repayment options. Explain your financial situation to the lender or collection agency. The lender might offer you a lower monthly payment option, deferment or forbearance. (See Tips section for more repayment options.) A deferment delays payment if you are unemployed or in school. Forbearance lowers the payment; you would be responsible for paying only the student loan interest during the agreed-upon period.
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Find out how many months of payments are required to move your account status out of default. This is especially important if you need to apply for financial aid again. Many collection agencies and lenders require six to nine months of payments before the account is moved out of default status.
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Complete any forms. Lenders and collection agencies will require you complete a form for deferment and forbearance options. You will need to agree to the option and terms, sign and date the form, and provide any required documentation to prove unemployment or enrollment in school. If requesting deferment because you are currently in school, go to your school's records or registrars office and request that it send the necessary deferment information to the lender.
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Call the lender or collection agency in about one week to verify that it received the required forms.
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Pay your student loan according to the agreed terms. Make sure to pay on time every month. You can arrange to have payment debited from your bank account automatically each month, or you can send a check or money order every month. Some lenders and collection agencies have online payment options.
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Tips & Warnings
You can also inquire about a graduated repayment plan, in which payments start off low and increase over time; an extended repayment plan, which lowers your monthly payments over a longer period; or an income-sensitive repayment plan, which uses your income to determine the amount you pay.
