How to Get Financial Aid After Defaulting on Student Loans

Missing payments for more than 270 days on a federal student loan may result in default.

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Defaulting on a student loan has negative consequences -- including problems getting federal financial aid in the future. The defaulted loan must either be paid off, or borrowers may qualify for a loan consolidation or rehabilitation program to bring the loan current. Once the loan is no longer in default, students regain eligibility for federal financial aid programs, including federal loans and grants. Although campus-based aid or private scholarships may not be affected by a defaulted loan, it makes good sense to take care of the debt.

Step 1

Go to www.nslds.ed.gov, the national student loan data system, and look up your student loans. You may have multiple loans with different student loan servicers. This central database of all your federal financial aid history will tell you how much you owe in loans, the amounts of your loans, the status of each loan and whom to contact for each.

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Step 2

Call your lender or student loan servicer to confirm the default status and balances with them. Explain your intent to resolve the default, explain your financial situation and ask if you qualify for rehabilitation. To qualify, you must be able to agree to an affordable and agreeable repayment plan; the payments may be less during rehabilitation than they are on other repayment plans.

Step 3

Make your payments on time, every time. After making a few on-time payments, you can consolidate your defaulted student loan and bring the loan current. Or after making nine consecutive on-time payments, your lender may agree to reacquire the defaulted loan and rehabilitate it. This removes the default from your credit history and stops any wage garnishment that may be in place. Loan consolidation is the quickest route to regain federal financial aid eligibility, but if you have the time, rehabilitation can cost less and also help repair your credit.

Tip

Defaulted private student loans do not appear in the national student loan database system. Check your credit report or loan origination paperwork to determine the default details and contact information for these accounts.