Managing Student Loan Default

Get help with your defaulted student loan

You may have defaulted on your student loan, but don’t panic! We are here to help guide you through this sometimes scary situation. By taking action now, you can avoid the serious consequences of default, including ruining your credit, having your wages, tax refunds, or Social Security income seized to pay for your defaulted loans—or even litigation.

You have options to get out of student loan default. The most important thing you can do is to take action now.

MANAGING FEDERAL STUDENT LOAN DEFAULT

There are several options to fully repay or get your federal student loan (such as a Stafford, PLUS, or Consolidation) out of default.

CONSIDER VSAC’S STUDENT LOAN REHABILITATION PROGRAM

One option for getting out of student loan default is called loan rehabilitation. Loan rehab is a one-time offer that lets you make payments based on your current income and overall financial situation. This can help you get back into repayment on your student loan and remove the default from your credit history.

If you have a VSAC federal student loan, you can take advantage of our Loan Rehabilitation Program. To qualify, you’ll need to agree in writing to make 9 on-time monthly payments within 10 months. You may only rehabilitate a loan once.

Here’s how the VSAC Student Loan Rehabilitation Program works:

  1. Calculate your payment amount—and submit your loan rehabilitation program agreement.

We understand that not all borrowers in default can pay their full monthly payment. Your payment amount will be based on your financial situation.

Example Adjusted Gross Income (AGI) State of Residence Family Size Monthly Payment
Single Person $16,000 Vermont 1 $5
Single Person $25,000 New Hampshire 1 $90
Married $25,000 Vermont 2 $13
Married with Children $80,000 Massachusetts 4

$545

Use this calculator to estimate monthly payments based on your circumstances and download a VSAC Student Loan Rehabilitation Program agreement or budget form.  

  • If you are satisfied with your calculated payment amount, return the completed VSAC loan rehabilitation program agreement along with the required documentation. Documentation includes a copy of your most recent tax return that shows your Adjusted Gross Income (AGI), family size, and state of residence. If you do not file taxes, please provide other proof of AGI, family size, and state of residence.
  • If the calculated monthly payment amount in step 1 is too high, you have the option of completing a budget form.  You must complete, sign, and return the form to VSAC.  If approved, VSAC will send you a student loan rehabilitation agreement that you must sign and return.
     
  1. Make 9 on-time qualifying payments during a 10-month period. This will complete the rehabilitation of your defaulted student loan.
  2. Your student loan will be transferred to a new loan servicer and VSAC will erase the loan default from your credit history. You will also again be eligible for any loan benefits that your original loan may have offered.

ADDITIONAL OPTIONS FOR MAKING PAYMENTS ON A DEFAULTED STUDENT LOAN

Other payment options for a loan that is in default include:

  • Consolidating your loan. You can refinance your federal loans into 1 consolidated loan with payments based on your income and loan amount. Once your consolidation is approved, your credit report will be updated to reflect that your defaulted loans are paid in full. But, unlike with the VSAC Loan Rehabilitation Program, the record of the default will not be removed from your credit history.

You will now make payments on your new consolidated loan to a new loan servicer. To learn more, visit the U.S. Department of Education’s Federal Student Aid website.

  • Making monthly payments. You can begin making one-time or automatically recurring monthly payments on your defaulted VSAC federal loan. This will not get your loan out of default, but is a step in the right direction. Make payments now >
     
  • Loan forgiveness. With this option, your federal student loan is literally forgiven—and your debt erased. This means you no longer have to pay back the money that you borrowed. To take advantage of this option, you must qualify for a loan forgiveness program such as Teacher Loan Forgiveness or Total and Permanent Disability. To learn more, visit the U.S. Department of Education’s Federal Student Aid website.

If these options do not fit your current situation, please call VSAC at 800-954-2440 or e-mail us at collections@vsac.org.

Beware of Student Loan Default Scams

You should never pay for help with managing your loan default. VSAC will help you for free. Learn more about avoiding scams at studentaid.gov.

MANAGING PRIVATE LOAN DEFAULT

If you’ve defaulted on a private student loan—such as a Vermont Advantage Loan (or an Extra, Law, or Medical Loan)—you have a few options that can help you get back on track. 

You can:

  • Pay your loan in full to avoid additional interest and collection fees
  • Pay your balance in full by making several large payments over a few months
  • Pay your balance in full by making regular monthly payments

If you have defaulted on a Vermont Advantage Loan, please contact the collection agency that VSAC has contracted to collect your loan:

Windham Professionals 

Regional Adjustment Bureau 

If you do not know which agency is currently collecting your loan, please call us at 800-954-2440.

Beware of Student Loan Default Scams

You should never pay for help with managing your loan default. VSAC will help you for free. Learn more about avoiding scams at studentaid.gov.