What is a Default Clearance Letter?

What is a Default Clearance Letter?

If your student loans went into repayment and you were unable to make payments or arrange a payment plan with your lender then your loans may have gone into a Default status. Most Federal Loans will move to a Default status if you miss payments for up to 270 days. For a more in depth look at how to avoid Default please visit the following page: https://studentaid.ed.gov/sa/repay-loans/default

If, after completing your FAFSA, the Department of Education determines you have loans in Default, CSU-Global will require a Default Clearance Letter before we are able to award additional funding. The reason for this is that Defaulting on a student loan removes your eligibility to continue receiving Aid through the Federal Government. 

To obtain a Default Clearance Letter you will need to contact your loan lender directly. Loan lender information can be found at www.nslds.ed.gov . When you contact your lender you will likely be given 3 options for getting your loan out of default:

  1. Repayment in Full 
  2. Loan Rehabilitation - To rehabilitate a defaulted Direct Loan or FFEL Program loan, you must agree in writing to:
    • Make 9 Monthly Payments 
    • Make each payment within 20 days of the due date
    • Make all 9 payments during a period of 10 Consecutive Months
      • After 6 consecutive payments, most loan lenders will offer a Default Clearance Letter, however, you will not have completely cleared the default until all 9 payments have been made, which can result in withdrawal of Aid in the future.
  3. Loan Consolidation - To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either:
    • Agree to repay the new Direct Consolidation Loan under an income-driven repayment plan or
    • Make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you can consolidate it. 
      • After your defaulted loan has been consolidated you will be eligible to receive additional Financial Aid funding, however, consolidation of a defaulted loan does not remove the record of the default from your credit history.