Also, the record of default on the rehabilitated loan will be removed from your credit history.
Another option for getting out of default is to consolidate your defaulted federal student loan into a Direct Consolidation Loan.
Late payments will remain on your credit report for seven years from when they were first reported.


To rehabilitate your loan, you must choose one of the two payment amounts.
Your loan holder may be collecting payments on your defaulted loan through wage garnishment or Treasury offset (taking all or part of your tax refunds or other government payments).
When your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset will stop.
You’ll regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness, and you’ll be eligible to receive federal student aid.
If you failed to make your payments on your federal student loan and now are in default, don’t let the consequences of default affect your financial future. Loan Rehabilitation Loan Consolidation Repayment in Full Getting Help With Your Defaulted Loan One way to get out of default is to repay the defaulted loan in full, but that's not a practical option for most borrowers.
The two main ways to get out of default are loan rehabilitation and loan consolidation.
To rehabilitate a defaulted Direct Loan or FFEL Program loan, you must Under a loan rehabilitation agreement, your loan holder will determine a reasonable monthly payment amount that is equal to 15 percent of your annual discretionary income, divided by 12.
Discretionary income is the amount of your adjusted gross income (from your most recent federal income tax return) that exceeds 150 percent of the poverty guideline amount for your state and family size.
If you make three voluntary, on-time, full monthly payments before consolidating, you can choose from any of the repayment plans available to Direct Consolidation Loan borrowers.