1. Loan Rehabilitation
What it is:
Make 9 on-time payments over 10 months to restore your loan to good standing.
Why it’s great:
Removes the default from your credit report
Lets you access deferment, forbearance, and loan forgiveness again
Restores eligibility for new federal aid
Heads up:
You can only rehab a loan once
Involuntary payments (like wage garnishment) don’t count toward the 9 payments
Payments can be as low as $5/month based on income and expenses.
2. Loan Consolidation
What it is:
Combine your defaulted loan(s) into one new Direct Consolidation Loan.
How to qualify:
Either make 3 on-time monthly payments first, or
Agree to repay under an income-driven repayment (IDR) plan
What to know:
Default stays on your credit history
You regain access to IDR, deferment, and future aid
Any unpaid interest is added to your loan balance
3. Repay in Full
You can always pay off your defaulted loan in full—but let’s be real, most people can’t. That’s why rehab and consolidation are the most common options.