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Repaying Your Loans


Defaulting means you failed to make payments on your student loan according to the terms of your promissory note. Your school, the financial institution that made or owns your loan, your loan guarantor and the federal government can take action to recover the money you owe. Here are some consequences of default:

  • National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.
  • You will be ineligible for additional federal student aid if you decide to return to school.
  • Loan payments can be deducted from your paycheck.
  • State and federal income tax refunds can be withheld and applied toward the amount you owe.
  • You will have to pay late fees and collection costs on top of what you already owe.
  • You can be sued.

Defaulting on your loan means that payment in full is due immediately. You will no longer be eligible for any type of deferment or forbearance.

There are ways to repay your defaulted student loan, and certain programs let you remove the loan from its defaulted status. Your options are:

  • Repay or satisfy the loan in full.
  • Make six agreed-upon monthly payments over a six-month period. Your payment amount must be approved in advance by your loan holder. Every payment must be received before the due date, and you can’t make all six payments at once. This makes you eligible to receive more federal financial aid. You must continue to make timely monthly payments to maintain your eligibility. You may qualify for this program only once.
  • Consolidate your loan through the Direct Consolidation Loan.
  • Rehabilitate your loan. To do that, you must make at least nine full payments of an agreed amount within twenty days of monthly due dates over a ten-month period. Payments made on an involuntary basis, garnishment or litigation, can’t be counted toward your nine payments. Once you have made the required payments, your loans may be purchased by an eligible lender or returned to the Direct Loan Servicing Center.

Advantages of loan rehabilitation include:

  • Your loan will no longer be in default.
  • The default status reported to the national credit reporting agencies will be deleted. However, your payment history will remain unchanged.
  • You will be eligible for the same benefits available on the loans before you defaulted, such as deferment, forbearance and Title IV eligibility.
  • Your wages will no longer be garnished, and the Internal Revenue Service will no longer withhold your income tax refund.

There is no statute of limitations on defaulted federal student loans, so you can’t get any more federal financial aid until you complete one of the options mentioned above.

Disputing your Default

If KHEAA is your guarantor and you would like to dispute your default, email ombudsman@kheaa.com.