Federal student loans are in default after you fall 270 days behind on payments. Defaulted student loans remain on your credit history for seven years after they are paid off. The Department of Education lists three options for getting student loans out of default: loan repayment, loan consolidation and loan rehabilitation. Only loan rehabilitation removes the default from your credit report. Rehabilitation is a one-time option. If you default a second time, you can't rehabilitate the loan again.
Rehabilitate Your Student Loan
Rehabilitation refers to making and fulfilling a rehabilitation agreement with the Department of Education. The first step is to contact the Department of Education and ask to rehabilitate the defaulted loan. For Perkins loans, contact your school instead. Furnish information about your income and expenses. Based on this information, the Department of Education determines a reasonable and affordable payment amount. You must make nine out of 10 consecutive payments on time. "On time" means within 20 days of the due date or within 15 days for Perkins loans. After you fulfill this agreement, a private-sector lender purchases your loan. After the paperwork is processed, the purchasing lender instructs the credit-reporting agencies to remove the default from your credit record.