Getting Out of Default

Note: Once you’re in default, you can’t get back into good standing simply by making or restarting your loan payments. When you have been transferred to a default servicer, you can only get your loans back into good standing through a consolidation or loan rehabilitation, or by discharging them through a cancellation or discharge program.

Most borrowers are eligible for loan consolidation or loan rehabilitation. Both options can get your loans out of default, which will protect you from having your wages garnished or tax refunds seized, and make you eligible again for federal student aid if you want to return to school. But there are pros and cons to each approach. 

What is Loan Consolidation? 

When you consolidate defaulted federal loans, you borrow a new federal loan that pays off the defaulted loans — including accrued interest and any fines or fees on the defaulted loans. When you consolidate loans out of default, the defaulted loans are paid off, and the new consolidation loan is in good standing. After your loans are consolidated, you will no longer have loans in default, and collections will stop. You will then be placed into repayment on your consolidation loan. Your consolidation loan may also be transferred to a new servicer.

Pros: 

• Generally, consolidation is one of the fastest ways to get your loans out of default — it typically only takes 4-6 weeks, though it can take longer.  
• Consolidating your loans is relatively easy and, in many cases, can be done online.
• When you apply to consolidate, you can also submit an application for an income-driven repayment plan, which could make repayment more affordable as soon as your loan is in good standing. 

Cons: 

• If you consolidate your loans, you may risk losing time you have previously earned toward IDR cancellation. That could mean that you have to spend more years in repayment before you’re eligible for IDR cancellation after consolidating. 
• Consolidating different types of loans together (such as Parent PLUS loans with subsidized loans taken out for your own education) can change your eligibility for certain income-driven repayment programs. Consolidating can also affect your eligibility for some cancellation and discharge programs. 
• If your consolidation loan is disbursed on or after July 1, 2026, it will have different repayment options than loans disbursed before that date. 

For more information about loan consolidation, see our page on consolidating your loans. You can also find more information about the pros and cons of loan consolidation and how to apply. 

What is Loan Rehabilitation? 

When you rehabilitate a loan, you make an agreement with your loan holder to make nine months of full, on-time payments based on your income. After you make all of your payments, your loans will be put back into good standing. Your loans will not be removed from default until you have made the nine months of required payments. Your loans may then be transferred to a new servicer, and you will be placed in a standard (fixed) repayment plan unless you apply for another repayment plan.

Pros: 

• Rehabilitating your loans will not change which repayment or relief options your loans are eligible for once they’re back in good standing, and will not erase any of the time you’ve already earned toward qualifying to have your loans cancelled through IDR. 
• After you successfully rehabilitate your loans, the Department of Education will remove the default notation from your credit report, although the missed payments that led to default will remain on your report for 7 years. 

Cons: 

• Rehabilitation takes at least nine months – usually much longer than consolidation – and is more complicated to set up. You typically have to make several phone calls and send documents through the mail as part of the process.
• If you do not make nine on-time, full monthly payments within ten months, your loans will not be removed from default. There is little room for error.
• If you began rehabilitating your loans after the government began garnishing your wages, taking your tax refund, or taking a portion of your Social Security benefits, the government can continue these collections even after you begin making rehabilitation payments. You must make the full rehabilitation payments even if the government is using its collection powers against you, although studentaid.gov says that it may stop collecting after five on-time payments have been made. 

See our page on loan rehabilitation for more information on how to apply.