If you fall behind in your student loan payments and end up in student loan default, there are a lot of tools the Department of Education can use to get their money back. If you have a federal loan then student loan default can cost you even more than the amount you originally borrowed. By defaulting on your loan you can be charged high fees by loan guaranty agencies and you may get charged for the commission fees that the Department of Education pays to collection agencies.

If you are in student loan default then the IRS can legally intercept your entire income tax refund until all your loans are paid in full. When it comes to student loan default this is the most common method the U.S. Department of Education uses to collect. The IRS will be notified of your student loan default if you haven't made a payment within 90 days. In order to object their claims you have 65 days from the time you receive your student loan default notice to show written evidence that you have repaid the loan, are making payments under a negotiated plan, that you have filed for bankruptcy, that you are disabled, that it isn't your loan, that you dropped out of school or for any other reason that the loan isn't legally enforceable.

What You Can Do About It
Even if you have had a student loan default you can still have some options open to you. If you choose the right course you can even regain your eligibility for financial aid, improve your credit rating and even get the student loan default status removed from your record. So what steps can you take?

The first and best option is loan rehabilitation. This is the only option that allows you to restore your credit rating and your eligibility for further financial aid. To qualify for this option you will have to make satisfactory repayment arrangements which usually means nine consecutive, full payments in about twenty days of their due date. The payment need to be made voluntarily by you and they can't come from legal proceedings, wage garnishment or a lump sum repayment made for the purpose of future installments.

If you make arrangements for a one time satisfactory repayment of a defaulted loan then you can restore your eligibility for financial aid. In order for this to happen you will need to make six consecutive, acceptable monthly payments within fifteen days of their due date. The acceptable payments are typically fifty or the accrued interest rate.