Can Student Loans in Default Be Forgiven? Yes — Here's How

Quick Facts

• You can potentially get student loan forgiveness even if your loans are in defaultDefaultThe status of a federal student loan after the borrower has failed to make required payments for 270 days. Default can trigger collection actions such as wage garnishment, tax refund offset, and damage to credit reports., but you typically need to get out of default first for most forgiveness programs.
• The Fresh StartFresh StartA temporary federal initiative that allowed borrowers with defaulted federal student loans to return to good standing with a simple opt-in, restoring eligibility for aid and income-driven repayment. The enrollment period ended in 2024. program, available until September 30, 2024, is currently the fastest and easiest way to get federal loans out of default and become eligible for forgiveness options.
• After getting out of default, you regain eligibility for various benefits, including federal financial aid, income-driven repayment plans, and forgiveness programs like Public Service Loan ForgivenessPublic Service Loan Forgiveness (PSLF)A federal program that forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for a government or qualifying nonprofit employer..

Overview

Yes, you can get student loan forgiveness even if you default, but it usually won’t happen automatically. For federal student loans, most programs require you to remove the student loan default status to become eligible for forgiveness or other debt relief opportunities. This typically involves rehabilitating or consolidating your loans into a new Direct Consolidation Loan. Once you’re out of default, you can pursue forgiveness options like income-driven repaymentIncome-Driven Repayment (IDR)A category of federal student loan repayment plans that calculate monthly payments based on income and family size rather than loan balance. Any remaining balance can be forgiven after 20–25 years of qualifying payments. plans or Public Service Loan Forgiveness.

For private student loans, forgiveness options are very limited from the start. Being in default further complicates the situation. Private lenders like Sallie Mae generally don’t offer forgiveness programs. Your best options with delinquent or defaulted private loans usually involve negotiating with the loan holder to pay less than the loan balance or filing student loan bankruptcy to try and discharge the debt.

Related: Defaulted Student Loans 20 Years Ago

Here’s a quick overview of major federal student loan forgiveness programs and their eligibility for loans in default:

1. Income-Driven Repayment Forgiveness

No

20-25 years

2. Public Service Loan Forgiveness

No

10 years

3. Teacher Loan ForgivenessTeacher Loan ForgivenessA federal program that can forgive up to $17,500 of Direct or FFELP loans for teachers who complete five consecutive years of full-time teaching at a low-income school or educational service agency.

No

5 years

4. Total and Permanent Disability DischargeTotal and Permanent Disability Discharge (TPD)A federal loan discharge for borrowers who are totally and permanently disabled, as documented by the Department of Veterans Affairs, the Social Security Administration, or a physician's certification.

Yes

Immediate upon approval

5. Closed School DischargeClosed School DischargeA federal loan discharge available to borrowers whose school closed while they were enrolled or shortly after they withdrew, before they could complete their program of study.

Yes

Immediate upon approval

6. Borrower Defense to RepaymentBorrower Defense to RepaymentA federal process for discharging Direct Loans when the school misled the borrower or engaged in misconduct related to the loan or the educational services it promised.

Yes

Varies

7. False Certification Discharge

Yes

Immediate upon approval

How Getting Out of Default Affects Eligibility For Loan Forgiveness

Most federal student loan forgiveness programs require you to get your loans out of default and in good standing before they can be forgiven. For example, PSLF and IDR ForgivenessIDR ForgivenessThe forgiveness of any remaining federal student loan balance after a borrower has completed 20 or 25 years of qualifying payments under an income-driven repayment plan, depending on the specific plan. require you to enroll in an IDR Plan and make on-time payments. Currently, the fastest and easiest way to get federal loans out of default is through the Education Department’s Fresh Start program.

Fresh Start is a temporary program available until September 30, 2024, that helps borrowers with defaulted federal student loans quickly return to good standing. After using Fresh Start, you can enroll in income-driven repayment plans and become eligible for various forgiveness options.

After the Fresh Start deadline passes, you have two other options to get out of default:

1. Loan Consolidation: Consolidate your defaulted federal loans into a Direct Consolidation Loan. This immediately brings your loans out of default and makes you eligible for income-driven repayment plans and associated forgiveness options.
2. Loan RehabilitationRehabilitationA federal program for borrowers in default that requires nine voluntary, on-time monthly payments over ten months. After rehabilitation, the default is removed from credit reports and federal aid eligibility is restored. It is available once per loan.: Make nine voluntary, reasonable, and affordable monthly payments within 10 consecutive months. After completing rehabilitation, your loans exit default status and you regain eligibility for forgiveness programs.

Related: Student Loan Rehabilitation vs Consolidation

Will Defaulted Student Loans Be Forgiven?

No, defaulted student loans will not be automatically forgiven under current initiatives. The Biden administration has introduced several programs to forgive student loan debt, but these primarily benefit borrowers whose loans are in good standing. Here’s what you need to know:

• The Public Service Loan Forgiveness Program changes only apply to loans not in default.
• The one-time account adjustment for IDR plans excludes defaulted loans.
• Early forgiveness under the Saving on a Valuable Education (SAVESAVE Plan (SAVE)The Saving on a Valuable Education Plan, a federal income-driven repayment plan introduced in 2023 to replace REPAYE. Its implementation has been subject to ongoing litigation, and enrolled borrowers have faced court-ordered forbearance periods.) Plan is not available for defaulted loans.

But there’s still hope for borrowers with defaulted loans:

• President Biden plans to introduce a new initiative in the fall of 2024, before leaving office, which may address defaulted loans.
• Details of this plan are limited, but it could potentially offer relief to borrowers in default.
• The administration has consistently worked to expand forgiveness options, so this new plan may provide solutions for those with defaulted loans.

Related: Biden Student Loan Forgiveness

How to Get Out of Default and Regain Eligibility for Forgiveness

To qualify for most loan forgiveness programs and avoid the severe consequences of default, you need to get your loans back into good standing. The Fresh Start program is how all student loan borrowers should do this today.

The program has already helped many borrowers. According to the Education Department, more than 300,000 borrowers had opted into Fresh Start as of November 2023. But this represents only a small fraction of the estimated 7.5 million eligible borrowers, meaning there’s still a significant opportunity to take advantage of this program before its September 30, 2024 deadline.

The best part about Fresh Start? Most people end up with an affordable monthly payment.

About 80% of Fresh Start borrowers opt for an income-driven repayment plan, with half paying $0 a month and 60% paying less than $50 a month. These plans calculate your payment based on your income and family size. You will never pay more than 5–20% of your discretionary incomeDiscretionary IncomeFor federal income-driven repayment plans, a borrower's adjusted gross income minus a set percentage of the federal poverty guideline for their family size. Monthly IDR payments are calculated as a percentage of this amount.. This makes staying out of default more manageable than many people expect.

Here are the main benefits of this program:

1. Regain eligibility for federal student aidFederal Student Aid (FSA)The office within the U.S. Department of Education that manages federal grants, work-study, and student loans. It runs the FAFSA, the StudentAid.gov website, and oversees the federal loan servicers., including new loans and Pell Grants.
2. Stop collection activities like wage garnishment, tax refund and Social Security benefit offset.
3. Remove negative marks of default from your credit reports, potentially improving your credit score.
4. Regain access to income-based repaymentIncome-Based Repayment (IBR)A federal income-driven repayment plan that caps monthly payments at 10% or 15% of discretionary income, depending on when the loans were taken out. Remaining debt is forgiven after 20 or 25 years of qualifying payments. options like SAVE, IBR, and PAYEPay As You Earn (PAYE)A federal income-driven repayment plan that caps monthly payments at 10% of discretionary income and forgives remaining debt after 20 years. It is only available to borrowers who took out their first federal loans on or after October 1, 2007..
5. Become eligible for student loan forgiveness programs.
6. Regain eligibility for deferments and forbearances.
7. Become eligible for government-backed mortgages (FHA, VA, and USDA) by being removed from the CAIVRS system.

To start the Fresh Start process, contact the Default Resolution Group. They can access the National Student Loan Data SystemNational Student Loan Data System (NSLDS)The U.S. Department of Education's central database of federal student loans and grants. It holds records of loan balances, disbursements, servicers, and enrollment history for federal aid recipients. to find all your defaulted federal loans, including Federal Family Education Loans (FFEL), Perkins Loans, and Direct Loans.

You can also visit myeddebt.ed.gov to create an online account or mail a letter to DRG and include your name, social security number, date of birth, current mailing address, and a short statement: “I would like to use Fresh Start to bring my loans back into good standing.”

Note: Other types of loans, like defaulted HEAL and HHS loans, may not be eligible for this program.

Bottom Line

Most forgiveness programs require your loans to be in good standing to qualify for relief. Thankfully, the U.S. Department of EducationU.S. Department of Education (ED)The federal agency that oversees federal student aid programs, issues regulations for federal student loans, and is the ultimate lender on Direct Loans. offers many options to get out of default and pursue forgiveness. The Fresh Start program offers an excellent opportunity until September 30, 2024.

Additionally, President Biden’s upcoming initiative may provide relief for defaulted loans, although details remain unclear.

Want help figuring out whether getting out of default makes sense for your situation? Book a consultation with one of our student loan experts. They can help you decide whether to get out of default and guide you toward potential forgiveness options.

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