To get defaulted federal student loans forgiven, you first need to get them out of default through Loan Rehabilitation (income-driven payments) or Consolidation (requires income-driven plan or 3 payments), then you can pursue specific forgiveness like Public Service Loan Forgiveness (PSLF) (if working in public service) or other programs like Borrower Defense or Closed School Discharge if you qualify, using tools at studentaid.gov/manage-loans/default, studentaid.gov/manage-loans/forgiveness-cancellation, and myeddebt.ed.gov.
Yes, defaulted federal student loans can potentially be forgiven, but you usually need to resolve the default first by rehabilitating or consolidating the loans to become eligible for programs like Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) plan forgiveness, as defaulted loans aren't directly eligible. The Fresh Start program offered a way to quickly get out of default (though it had a deadline), but rehabilitation (making 9 payments) or consolidation are key paths to restore eligibility for future forgiveness.
Rehabilitation payments must be received within 20 days of the due date to be considered on time. After your ninth rehabilitation payment, ED will send a request to credit reporting agencies to remove the record of default from your account. NOTE: You can rehabilitate a defaulted loan only once.
In some cases the US Department of Education will allow a defaulted borrower to pay part of the settlement amount in monthly installments, but these installments will generally be paid within the same fiscal year. The US Department of Education will never settle debts that involved fraud.
The "7-year rule" for student loans generally refers to when negative marks, like defaults, are removed from your credit report (around 7 years after the first missed payment or default date for federal loans, 7.5 years for private loans), but the debt itself doesn't disappear and must be paid off; it's also a benchmark in bankruptcy proceedings where federal loans can become dischargeable after 7 years from when payments were due, though proving "undue hardship" is required and difficult.
However, there are several things that can reduce its negative impact: Repayment. Try and pay off what you owe as soon as possible. Once you've achieved this, the default will be marked as 'satisfied' on your credit report, which looks better to lenders.
Some other impacts of not paying your loans: For federal loans, your tax return can be withheld and they can even put a hold on your salary (called wage garnishment). You can lose your loan's benefits and the ability to change your federal loan repayment plan. You may not be eligible for future student loans.
Federal student loans can be wiped out after 20 or 25 years under Income-Driven Repayment (IDR) plans, while Public Service Loan Forgiveness (PSLF) offers forgiveness after 10 years for public service workers, but there's no set age for all loans to disappear, with some private loans having statute of limitations for collections but not erasing the debt itself. Forgiveness under IDR happens at the end of the repayment term, not automatically after a certain age, though the U.S. Department of Education is working on one-time forgiveness for long-term borrowers.
However, if you miss enough student loan payments, your accounts will first move into delinquency status and then into default status. Once you default on student loans, you're at risk of having your house taken to pay them back.
School-Related Discharge Options
Borrower defense to repayment is a legal ground for discharging federal Direct Loans. Borrowers apply for borrower defense for specific reasons that are outlined more thoroughly here. Another form of school-related discharge is closed school discharge.
If you stopped paying your student loans and your loans went into default more than 7 years ago, they can disappear from your credit report. However, don't make the mistake of assuming this means your loans have gone away. You can (and likely will) still be taken to court or collections for non-payment.
You qualify for student loan forgiveness through specific federal programs like Public Service Loan Forgiveness (PSLF) for government/non-profit workers, Income-Driven Repayment (IDR) Forgiveness after 20-25 years, and targeted relief for defrauded students (Borrower Defense) or the totally and permanently disabled, with new Biden-era rules also helping long-term borrowers, those with significant balance growth, or those who didn't finish school. Eligibility hinges on having federal loans and meeting specific work, payment, or circumstance requirements.
While receiving a notice of default is daunting, you are not out of options. From loan modification and negotiating with your lender to filing for bankruptcy, there are ways to avoid foreclosure and even keep your home.
It's partly true: most negative items like late payments and collections are removed from your credit report after about seven years, but the underlying debt often still exists, and bankruptcies (Chapter 7) last 10 years, so your credit isn't entirely "clear" but mostly refreshed from old negatives. The 7-year clock starts from the date of the original delinquency, not when you paid it off or sent to collections, and the debt itself can still be pursued by collectors.
Loan Forgiveness Timeline: Federal student loans can be forgiven after 10 years through Public Service Loan Forgiveness (PSLF) or after 20-25 years under Income-Driven Repayment (IDR) plans.
If you stop working, or start to earn below the repayment threshold, your repayments will stop until you earn over the threshold. You'll make a repayment if you go over the weekly or monthly threshold at any point during the year, for example, if you get a bonus or work overtime.
If you default on your student loans, you can be reported to credit agencies, have your wages garnished, and even be sued. You can get out of default through repayment, loan rehabilitation or consolidation. Right now, loans in default can only be rehabilitated through the Fresh Start program.
No More Than Seven Times in a Seven-Day Period
Under the 7-in-7 Rule, debt collectors are restricted to contacting a consumer no more than seven times within any seven days. This rule applies to all communication methods, whether phone calls, emails, text messages, or other forms of contact.
If you've paid the amount claimed in the default already, or a default notice was sent to you by mistake, you'll be able to ask for this to be removed from your account. You can also ask for it to be removed if you are not at least three to six months in arrears.