For federal loans in default you actually have 3 options to get out of default: 1) loan rehabilitation, 2) federal loan consolidation, and 3) repayment in full.
Defaulted loans are not eligible for any of our student loan forgiveness programs. But if you take advantage of Fresh Start, you'll get out of default status. Then you'll regain the ability to apply for forgiveness programs, including Public Service Loan Forgiveness.
If You Are Delinquent or In Default, Your Loan Servicer Can Help. If you're having trouble making payments or are concerned about the status of your federal student loan(s), you have options available to you. Contact your loan servicer to discuss how to get back on track with payments.
Will Treasury offset, such as withholding of tax refunds and Social Security benefits, resume after the student loan payment pause ends? No. If you're eligible for the Fresh Start for defaulted loans, any collections on those defaulted loans, including through Treasury offset, will stay paused through Sept. 30, 2024.
Both federal and private student loans fall off your credit report about seven years after your last payment or date of default. You default after nine months of nonpayment for federal student loans, and you're not in deferment or forbearance.
Collection activities are currently paused for all federal student loans through September 2024, which should protect your 2022 and 2023 federal and state tax refunds. But you may need to take action.
Consolidate Your Loans. Another way to get out of default is to consolidate your defaulted federal student loan into a Direct Consolidation Loan. Loan consolidation allows you to pay off one or more federal student loans with a new consolidation loan.
Do You Qualify for the IRS Fresh Start Program? To qualify for the IRS Fresh Start Program in 2025, taxpayers generally need to meet one or more of the following conditions: Owe Back Taxes: Individuals or small businesses with outstanding federal tax debt.
Your loan can be discharged only under specific circumstances, such as school closure, a school's false certification of your eligibility to receive a loan, a school's failure to pay a required loan refund, or because of total and permanent disability, bankruptcy, identity theft, or death.
When you fall behind on payments, there's no property for the lender to take. The bank has to sue you and get an order from a judge before taking any of your property. Student loans are unsecured loans. As a result, student loans can't take your house if you make your payments on time.
How Many People Are Currently in Default on Their Student Loans? By the end of 2021, roughly 3 million people were in student loan default — that's about 7% of all borrowers. Another 270,000 were 90-270 days delinquent on their student loans — meaning they missed a payment but hadn't defaulted yet.
For Written Contracts: Most private student loans are considered written contracts. Under California law, the statute of limitations for a written contract is four years. This means the lender has four years from the date you miss a payment (and breach the contract) to sue you.
Please contact the Department of Education at 1-800-621-3115 for options on how to resolve your defaulted loan. To access your Federal Student Loan information, visit studentaid.gov. Your Federal Student Aid (FSA) ID and password is required to access this website.
After the six payments, you become eligible for aid again. (Keep in mind that your loan will still be in default status unless you rehabilitate the loan, consolidate the loan, or repay it in full.)
Contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that lowers your monthly payment and, in some cases, may be based on your income. You can also ask your loan servicer about your options for a deferment or forbearance or loan consolidation.
Applying for the IRS Fresh Start program
It's only after filing tax returns that you can go to the IRS gov to get yourself enrolled using the Online Payment Agreement tool. The tool lets you choose your preferred repayment option.
Note: The Fresh Start program ended at 2:59 a.m. Eastern time on Oct. 2, 2024. Learn about other ways to get your loan out of default. It takes 4–6 weeks for most people to have their request processed and be transferred to their new non-default servicer.
Owing less than $50,000: The program is available to taxpayers with outstanding tax debts of $50,000 or less. If your debt exceeds this threshold, you may still qualify by paying down your balance to meet the requirement.
Although there are some broad requirements you must meet to qualify for federal aid, there's no FAFSA income limit. The FAFSA's calculations are complex and consider many factors outside of your earnings, including your school's cost of attendance, your family size, and your year in school.
Can the IRS take my refund for student loans if I'm approved for a deferment? Share: If your student loan is in deferment, the IRS won't take your refund. The IRS will only take your refund if you're delinquent with your student loans to offset debt.
If you default on a federal student loan, then your wages or bank accounts can be garnished without a court order or judgment. The maximum that can be withheld for federal student loan garnishment is 15% of your disposable income.
Lose eligibility for federal benefits like repayment plans, deferment and forbearance. Get cut off from additional federal student aid. Have tax refunds withheld and/or a portion of your wages garnished to repay defaulted loan. Risk being sued by loan servicer to collect on the debt.