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Well, the best way to get out of student loan default is not defaulting on your student loans in the first place. However, if you have already defaulted on your federal student loans, there are ways to get out—in fact, there are four major options.
Pay Off the Loan in Full
Let’s start off with the most obvious, if not a bit intimidating. One way to get out of default is just to pay off the entire loan in one go. This option is far from ideal for some students. After all, they would not have gone into default in the first place if they had the money to pay off the loan. But sometimes a family member might lend a helping hand or perhaps you get a new job after you default and have the income to pay the debt. Regardless of how, the US Department of Education accepts checks or even credit card payments. But if this isn’t an option for you, we have a few more that aren’t as intimidating.
Cancel the Loan
This option has a lot of regulations attached to it, of course. You can’t just cancel a loan for any reason whatsoever. Circumstances like sudden disability from an accident or your college being shut down are grounds to cancel a loan in default, but even they have strict rules to follow. All the same, it is still possible to cancel your federal loan repayments. If you meet the requirements, try applying for a cancellation. It may be worth your time, and you never know if you’ll get approved.
Consolidate Loans
Student loan consolidation is definitely something to consider—instead of paying different payments at different times with your different loans, consolidate your student loans into a singular payment. If you’re in default, you’ll be asked to make three consecutive on-time payments, otherwise you’re other option is to join up with an income-based repayment plan. By consolidating your loans, you’ll get a new interest rate, new monthly payment amount, and a new set of terms. As long as you can make the three consecutive payments, consolidating is a good option if you’re struggling to make your current repayments.
Rehabilitate the Loan
Another way to get out of default is to work directly with the Department of Education to work out a repayment plan that works for both of you. 10 on-time payments will be established, and you have to meet 9 of the 10. It can be a bit of a complicated process, but many find it well worth it.
Pick whichever option works best for you. Getting out of student loan default should be your first priority. Defaulting can have lasting effects on your financial health and credit score. Not to mention, defaulting puts you in a stressful and difficult space. No one wants to default, and hopefully, these options help you get out of it.
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