Rehabilitate the loan. This process will require calling your lender and setting up a new repayment plan for the loan. If your student loan is federal, it will be rehabilitated after you make nine on-time payments. The derogatory payment history that was inserted into your credit report when you initially defaulted on the loan will also be removed. If you have a private student loan, you will need to contact your lender to find out which programs it offers, if any, to help debtors rehabilitate defaulted loans.
Check the statute of limitations on your private student loans. While loans made by the federal government have no statute of limitations, private loans do. Each state has its own statute of limitations for debt collection. Once the statute of limitations expires, a lender no longer has the right to sue a debtor over a debt. Although the debtor still technically owes the debt, he cannot be legally forced to pay it.
Settle the loan. A private loan is much easier to settle than a federal loan because a private lender has to adhere to the state statute of limitations concerning debt collection, whereas a federal student loan does not. The longer your private student loan has been in default, the less you will need to pay to settle it. The federal government may be willing to knock off added fees and interest, but it will not settle a loan for less than the original balance.
Evaluate the education you received. If the college you attended lost its accreditation or closed down prior to you being able to complete your course of study, you will not be held liable for your defaulted federal student loans. You must provide proof to the U.S. Department of Education that this occurred. Some private lenders offer this loan feature as well.
File for a financial hardship discharge through bankruptcy. It is a common misconception that student loans cannot be discharged in a bankruptcy. This is not always the case. If you can prove that you are incapable of paying your student loans due to a hardship, and that your financial situation is unlikely to improve in the future, you can secure a discharge.