How to Prevent Default on Student Loans (and What to Do If It’s Too Late)

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Student loan default is more common than you may think. More than 11 percent of the 44 million Americans with student loans are more than 90 days delinquent or have defaulted on their debt.

Going into default can have serious consequences on your financial future, affecting everything from your ability to get a new car to getting approved for an apartment. Learning how to manage your loans and prevent defaulting on your debt is essential for your financial security.

Here’s what you need to know about default on student loans and what you can do to protect yourself.

What it means to default on student loans

The first day you miss a payment, you become delinquent on your loans. If you continue to miss payments, your loans could enter into default. For federal loans, you are in default when you fail to make a payment for 270 days, or about nine months.

Private loans have much stricter limits. Most lenders consider you to be in default if you miss just three months of payments.

Consequences of falling behind

Whether you have federal or private loans, defaulting on your debt can have lasting consequences. Here’s what you can expect if you fall behind.

Private loans

For private student loans, you will owe the full balance of your debt as soon as you enter default. If you recently graduated and fell behind in the first few months, that means you could owe thousands right away.

If you can’t pay up, your lender could send your loan to collections. If that happens, you can expect daily phone calls and letters about your debt. Your lender can also add collection charges to your loan, which could cause your debt to grow by up to 40 percent.

If you default, your lender can also report that to the three credit bureaus, damaging your credit score.

If you are still unable to make payments, your lender can get a court judgment against you and garnish your wages. Depending on where you live, the lender may be able to take as much as 25 percent of your paycheck.

Many borrowers have a cosigner for their private loans, and that can make defaulting even more difficult. Since your cosigner’s name is on the loan, they’re responsible for the debt if you don’t make payments. Your loved one could be on the hook for your full balance, which could strain or even destroy your relationship.

Federal loans

The consequences of defaulting on federal student loans can be even more severe. Like private loans, you will immediately owe the full balance of your loans, along with any interest that accrued.

You will lose eligibility for valuable federal loan benefits like access to income-driven repayment (IDR) plans, deferment, or forbearance. You also will no longer qualify for further financial aid.

The government may send your loans to collections, but unlike private lenders, they can also go after your taxes. If you default on your loans, the IRS can take your entire tax refund.

The federal loan servicer can also pursue wage garnishment against you or take legal action, which can prevent you from purchasing or selling assets like a home.

How to prevent default

If you’re struggling to make your payments, it’s important to take action right away to prevent default. Here are three things you can do:

  • Sign up for an IDR plan: If you have federal loans, you may be eligible for an IDR plan. Under these plans, your monthly payment is capped at a percentage of your discretionary income, making your payments more manageable.
  • Apply for forbearance or deferment: Both federal and private loans may be eligible for forbearance or deferment, where you can postpone making payments without entering into default. Many lenders offer temporary holds on your account if you can demonstrate financial hardship.
  • Ask about alternative repayment plans: If you have private loans and are not eligible for deferment, contact your lender and ask about alternative repayment plans. Some lenders will work with borrowers, allowing you to make interest-only payments or reduced payments on your debt until you’re back on your feet.

How to get out of default

If you’ve already defaulted on your loans, it’s important to get out of default as quickly as possible to reduce the negative impact on your credit history and finances.

If you defaulted on your loans, you might be able to get out by using one of the following options.

1. Consolidate your debt

If you have federal loans, you can get out of default by consolidating your debt with a Direct Consolidation Loan. Once you consolidate, you must sign up for an IDR plan to manage your loans.

While this approach will get you out of default, consolidating does not remove the default from your credit report.

2. Rehabilitate your loans

Another option for defaulted federal loans is to rehabilitate your debt. Through this process, you agree to make nine monthly payments. The U.S. Department of Education will work with you to set up a new payment plan.

Under a loan rehabilitation agreement, they will offer you a payment that is equal to 15 percent of your discretionary income. Depending on your situation, your payment could be as little as $5.

After making the required payments, your loan is considered rehabilitated and the default is removed from your credit history.

3. Pay off the loans in full

While it may sound counterintuitive, paying off your loan balance in full will get you out of default quickly.

It may sound impossible, but being in default on student loans is a crisis situation. Weigh your options and consider asking friends or family for help to pay off the debt to get you out as quickly as possible.

4. Take out a personal loan

If you have private loans in default and don’t have the money to pay them off in full, consider applying for a personal loan. If you can’t get approved because the defaulted loans tanked your credit, you may be able to qualify for a personal loan with a cosigner. You can use the new loan to pay off your loans in default.

However, this approach only works if you have a plan in place for making your payments going forward. Otherwise, you risk compounding the issue by defaulting on the personal loan, too.

5. Set up a plan

When it comes to private loans in default, your options are limited. One of the best things you can do is contact your loan servicer, explain your situation, and communicate your determination to move forward. They may be willing to work with you to come up with a solution, such as temporarily reduced payments to help you get out of default.

Handling a default on student loans

If you’re struggling with your payments, take action now to talk to your lender and come up with a plan. Signing up for an alternative repayment plan or entering a temporary forbearance can prevent more serious issues from occurring later on.

Need more help? Learn about your options and rights when you default on private student loans.

Interested in refinancing student loans?

Here are the top 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.89% – 6.66%1Undergrad
& Graduate

Visit Splash

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.25% – 6.09%3Undergrad
& Graduate

Visit SoFi

1.99% – 5.34%4Undergrad
& Graduate

Visit Earnest

1.97% – 8.54%5Undergrad
& Graduate

Visit Lendkey

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.

2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.


This information is current as of September 9, 2020. Information and rates are subject to change without notice.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.09% APR (with AutoPay). Variable rates from 2.25% APR to 6.09% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

5 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 11/13/2020 student loan refinancing rates range from 1.97% to 8.54% Variable APR with AutoPay and 2.95% to 8.77% Fixed APR with AutoPay.