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Fri: 8:00 a.m. – 5:00 p.m.
Sat: 8:00 a.m. – 12:00 p.m.

Please note: All times Eastern.

Recovering From Default

You may feel trapped by the consequences of default. But you can recover by paying your loan in full, entering a loan rehabilitation program, or consolidating out of default.

The benefits of completing these options include:

  • You can regain eligibility for additional financial aid.
  • Your wages and tax refunds will not be garnished.
  • Your loan will no longer be due in full.
  • You can regain access to unused deferment and forbearance time.

Payment in Full

Paying the total amount you owe—the loan plus any accrued interest and penalty fees—is the fastest way out of default.

  • Paying in full may not make sense for you, but try to pay as much as you can right away.
  • Collection costs of up to 25% are applied to your loan balance 120 days after your loan defaults, so decreasing your balance can help decrease these costs.

Loan Rehabilitation

Get yourself—and your credit—back on track by entering into a loan rehabilitation program. You'll still face collection costs, but they'll be less expensive.

  • If your loan defaults, you can enroll in the loan rehabilitation program by contacting your guarantor—American Student Assistance® (ASA) is a guarantor.
  • You then make at least 9 qualifying, on-time monthly payments to your guarantor.
  • Once you have made the required payments, your guarantor will send you a rehabilitation agreement for you to sign and return.
  • Your loan is considered rehabilitated when you receive an official notification from your guarantor.
  • After you have returned the completed agreement, your guarantor transfers the loan to a new lender and servicer. The loan is then out of default, and you continue making on-time monthly payments to your new servicer.
  • You will be charged up to 18.5% of your total unpaid loan amount (your principal balance plus interest) in collection costs.
  • Your guarantor will ask your previous loan holder and consumer reporting agencies to remove the default entry from your credit report.
  • Keep in mind that loans rehabilitated after August 14, 2008, are no longer eligible to be rehabilitated again in the event of another default—so be sure to stay on track once your loan is out of default.


Consolidating out of default has benefits—like giving you more time to repay your loan and less expensive collection costs. But, before choosing this option, be aware of its potential disadvantages too.

  • To consolidate out of default, you must do one of the following:
    • Arrange 3 consecutive payments with your current loan holder—this is called a satisfactory repayment arrangement.
    • Agree to repay the Consolidation loan under an income-based, income-contingent (Direct Consolidation loan), or income-sensitive (Federal Family Education Loan Program Consolidation loan) repayment plan.
  • Unlike rehabilitation, consolidation does not remove the default record from your credit report.
  • If you consolidate, you will be charged a fee of 18.5% of your total unpaid loan amount (your principal balance plus interest) in collection costs.
  • You can consolidate with any lender offering Consolidation loans. Currently, the primary consolidation lender is the Direct Loan program, run by the U.S. Department of Education.
  • Learn more about consolidating student loans.

Going Back to School?

You may be able to get additional financial aid if you make 6 consecutive, reasonable, and affordable payments on your loan. Contact ASA® to find out more.