After nine months of missed payments, your student loan account will fall into default status. That’s when calls from debt collectors start, your credit takes a serious hit, and you potentially face legal action from the company that issued the loan. What can you do to get out of default status and back on the road to financial stability? This blog goes over four ways.


This is the preferred method of escaping default status. With consolidation, you combine your federal student loans into a single loan with an income-related repayment plan. Even if your loan is an older one, then consolidation can make you eligible for an updated and more favorable payment plan. You can also start building the credit you need to be eligible for Public Service Loan Forgiveness.


If you are in default on your student loan, then you have the right to negotiate a payment plan that is “reasonable and affordable.” The plan will be geared to your income (usually 15% or less). Negotiation does not immediately release you from default status, however. You will have to make at least nine payments on time within 10 consecutive months first.


When you make nine out of 10 loan payments on time, you qualify for a loan rehabilitation agreement with the Department of Education, which will remove the default status from your credit report. The agreement will require you to commit to a 10-year payment plan (alternatives may be possible). You can only apply for loan rehabilitation once, so be sure you can afford the payments before you sign the dotted line.


Canceling your loan is possible, but only under certain conditions. Examples of situations that may permit the cancellation of a student loan include:

  • Closure of the school you attended
  • You did not get a refund you were entitled to
  • Your school misled you about the benefits of the education you received
  • You entered a certain occupation after graduation, such as public service
  • You become disabled
  • You pass away

Pay the balance

If you pay the balance remaining on your student loan in full, then you will get out of default and be able to rebuild your credit and your financial standing.

If you need assistance dealing with collection agencies or determining the best means of resolving your default situation, then consult with a New York bankruptcy attorney who can even help you explore the feasibility of bankruptcy in your situation. Student loan debt can be overwhelming, but once you hit on a plan of action that is right for you, you will feel less stressed and more able to face the future.

Jayson Lutzky is a Bronx, NY attorney who handles Chapter 7 bankruptcy cases. If you are facing significant debt that you feel you cannot pay, then contact Mr. Lutzky’s office at 718-514-6619 or visit to set up a free initial in-person consultation with Mr. Lutzky. He can help you determine if bankruptcy is right for you.