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Defaulted Federal Student Loans FAQs

Consumer Rights Law Firm PLLC | Call 877-700-5790 for a Free Consultation

Default means you missed payments for a prolonged period, usually 270 days for Direct Loans. Once that happens, your entire balance, including interest and collection fees, becomes due immediately. The government can then take aggressive steps to collect, but you still have legal rights and solutions available.
When you default, your account is transferred to a government-contracted collection agency. They can garnish your wages, take your tax refunds, and charge substantial fees. Your credit score will drop, and you lose eligibility for federal benefits until the default is resolved.
Yes. Through Administrative Wage Garnishment, the government can take up to 15 percent of your disposable income without a court order. However, they must give you written notice first, and you have the right to request a hearing or enter a rehabilitation program to stop or reduce the garnishment.
Yes, but timing is critical. You can request a hardship hearing or begin loan rehabilitation or consolidation to stop or reduce the garnishment. Once you take action, the garnishment can often be suspended while your case is reviewed.
You can resolve default through loan rehabilitation, loan consolidation, full repayment, or in some cases, discharge due to disability or school closure. Each path has different benefits depending on your income, goals, and credit. At Consumer Rights Law Firm PLLC, we help you choose the best route for your situation.
Loan rehabilitation requires nine on-time, income-based payments over ten months. These payments can be very low based on your financial situation. Once you complete the program, the default is removed from your credit record and you regain eligibility for deferment, forbearance, and federal repayment plans.
Rehabilitation takes longer but removes the default mark from your credit report when completed. Consolidation is faster — your new Direct Consolidation Loan is immediately current — but the default notation can remain. We help you decide which approach best fits your financial priorities.
No. Default damages your credit, but it’s not permanent. The negative mark typically lasts seven years, and you can rebuild credit by exiting default, making consistent payments, and avoiding future delinquencies.
The Treasury Offset Program allows the government to seize your federal tax refunds and certain federal benefits to repay defaulted loans. It happens automatically once your loan is reported to the Treasury Department. You can challenge this action if there’s an error or you’re actively working to resolve the default
Yes, though it’s less common. The government usually relies on administrative collection tools like wage garnishment or refund seizure. If you are sued, you have the right to contest the lawsuit, demand proof of the debt, and protect yourself against improper judgments.
Collectors can only contact others to locate you — not to discuss your debt. Repeated or public calls, or any disclosure of your financial details, are violations of your rights. Keep records of every contact so we can help you hold them accountable.
No. Harassment, threats, profanity, or repeated calls are illegal under the Fair Debt Collection Practices Act. Federal contractors and collection agencies must follow this law. If they cross the line, you may be entitled to compensation for their misconduct.
Possibly. Federal student loan settlements are available under specific Department of Education guidelines and often depend on your hardship and ability to pay. Settlement amounts vary, but we can help you explore this option and negotiate directly with the collector.
It’s difficult but not impossible. To discharge federal student loans, you must file an adversary proceeding in bankruptcy court and prove undue hardship. Courts are becoming more open to legitimate hardship cases, so this option is worth reviewing if your situation is extreme.
Your federal tax refund can be intercepted through the Treasury Offset Program to repay your defaulted loans. You will receive advance notice before this happens. If you believe the offset was in error or your loan is already in rehabilitation, you can challenge the action.
Federal loans remain in default until you take action. There is no standard statute of limitations on federal student loans, so ignoring them won’t make them go away. The faster you act, the more options you have and the less interest and penalties you’ll owe.
Yes. Once you complete rehabilitation or consolidation, you can re-enter income-driven repayment plans and qualify for programs like Public Service Loan Forgiveness again. Default temporarily blocks these benefits, but they can be restored once your loans are current.
Rehabilitation usually takes nine to ten months of consecutive on-time payments. Missing a payment restarts the process, so consistency matters. When finished, your loan returns to a regular servicer, the default is removed, and your credit begins to recover.
Log in to your account at studentaid.gov to view your loan status. If your loan lists a collection agency instead of a servicer, it’s in default. You can also contact us at Consumer Rights Law Firm PLLC, and we’ll confirm your status and identify who currently holds your loan.

We help you stop harassment, protect your wages, and get out of default quickly. Our attorneys understand federal student loan law and know how to challenge illegal collection practices. We create a plan to end the calls, resolve your debt, and restore your financial peace of mind.

📞 Call Consumer Rights Law Firm PLLC today at 877-700-5790 for a free case review.

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FAQs

The Fair Credit Reporting Act (FCRA) is a U.S. federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information. Here are some frequently asked questions (FAQs) regarding the FCRA:

The FCRA aims to ensure the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. It protects consumers from the misuse of their information and ensures that consumer reporting agencies adhere to fair practices.
The FCRA covers consumer reporting agencies (CRAs), which include credit bureaus and specialty agencies that sell information about consumers. It also applies to businesses that use consumer reports, such as lenders, employers, and landlords.

Consumers have several rights under the FCRA, including:


  • The right to access their credit report.
  • The right to know if information in their file has been used against them.
  • The right to dispute incomplete or inaccurate information.
  • The right to have incorrect information corrected or deleted.
  • The right to limit access to their credit file.
Consumers are entitled to one free credit report every 12 months from each of the three major credit bureaus (Equifax, Experian, and TransUnion) through AnnualCreditReport.com. Additionally, consumers may be eligible for additional free reports under certain circumstances, such as being denied credit or being unemployed and seeking employment.

To dispute inaccurate information, consumers should:


  • Contact the credit reporting agency and the company that provided the information.
  • Provide a detailed explanation of the dispute along with supporting documents.
  • The credit reporting agency must investigate the dispute, usually within 30 days, and correct or remove inaccurate information.
Most negative information can remain on a credit report for up to seven years. Exceptions include bankruptcy information, which can remain for up to 10 years, and unpaid tax liens, which can stay indefinitely or until paid.
Employers can access a consumer’s credit report for employment purposes, but they must obtain written consent from the consumer before doing so. Additionally, if the employer takes adverse action based on the report, they must provide the consumer with a copy of the report and a summary of their rights under the FCRA.

A credit report typically includes:


  • Personal information (name, address, Social Security number, date of birth).
  • Credit account information (account types, balances, payment history).
  • Public records (bankruptcies, tax liens, judgments).
  • Inquiries (requests for the consumer’s credit report).

Businesses that use consumer reports must:


  • Notify consumers if information in their report has been used to take adverse action against them.
  • Provide consumers with the name, address, and phone number of the credit reporting agency that supplied the report.
  • Obtain consumer consent before accessing their credit report for employment purposes.
Yes, consumers can place a security freeze on their credit report to restrict access to their credit file. This can help prevent identity theft. Consumers must contact each of the three major credit bureaus to request a freeze.
A fraud alert is a notice placed on a consumer’s credit report to warn potential creditors of possible identity theft. Consumers can request a fraud alert by contacting one of the three major credit bureaus. The alert will then be shared with the other two bureaus.

If a consumer’s identity is stolen, they should:


  • Place a fraud alert on their credit reports.
  • Review their credit reports for unauthorized activity.
  • Close accounts that have been tampered with or opened fraudulently.
  • File a report with the Federal Trade Commission (FTC) and a police report.

For more detailed information, consumers should refer to the official FCRA guidelines or consult with legal experts specializing in consumer rights.