Can you refinance a student loan that is already in default?

For private student loans, sometimes yes. A small number of lenders will refinance a defaulted or charged off private student loan into a new fixed rate loan when the borrower is employed and willing to repay. That ends the default and the collection activity tied to it. Federal loans work differently and use consolidation or rehabilitation instead.

Most refinance lenders will not touch a loan in default. GradMerge exists specifically for the loans other lenders decline. We are a marketing and referral service, not a lender. We connect you to our licensed lending partner which reviews your situation and makes the actual decision.

	Federal student loans	Private student loans
Income driven repayment	Available	Not available
Forgiveness programs	Available in some cases	None
Loan rehabilitation to exit default	Available	Not offered by most lenders
Government hardship protections	Yes	No
Bankruptcy	Difficult	Far harder to discharge than ordinary debt, and these loans often survive a filing
Refinancing out of default	Generally requires exiting default first	Possible with a small number of lenders, including our partner

Charged off does not mean forgiven, and it does not mean finished

A charge-off is an accounting decision by the lender. After a stretch of missed payments, usually somewhere around 120 to 180 days depending on your promissory note, the lender writes the balance off as a loss on its own books. That is all it is.

You still owe the money. The account can still be sold to a debt buyer, still be pursued by a collection agency, still generate a lawsuit inside your state's statute of limitations, and still sit on your credit report. Interest and fees may still be accruing.

The one thing a charge-off is not is the end of your options. The debt still belongs to someone, and that someone would nearly always rather be paid than litigate. That is real leverage, and most borrowers never realize they have it.

See what refinancing a charged off loan looks like

What actually changes

• One fixed monthly payment on a set schedule instead of an open-ended defaulted balance
• A low fixed rate set by the lender, so the payment does not move on you
• The collection activity attached to the old defaulted loan ends when that loan is paid off
• A repayment path with an end date, which is the thing default takes away from people

Refinancing does not erase your credit history. The old account should update to reflect that it was paid, but the record of the past delinquency generally remains on your credit report for up to seven years from the original first missed payment. Anyone promising to delete that history is selling you something.

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How to spot a student loan scam, including if it were us

Anyone who does any of the following should lose your trust immediately:

• Charges you a fee before anything happens
• Guarantees approval, a specific rate, or a specific savings amount
• Tells you to stop communicating with your lender or to ignore a lawsuit
• Pressures you with a deadline that only exists in their sales script
• Claims to be affiliated with the Department of Education or a government program

GradMerge does none of those things. If you ever encounter someone claiming to be one who does, contact the Consumer Financial Protection Bureau at https://www.consumerfinance.gov/complaint/.

Option	Works when	The catch
Do nothing	Never a strategy	Collections continue, balance grows, and a lawsuit becomes more likely over time
Settle for a lump sum	You have significant cash available now	Requires money most defaulted borrowers do not have. Forgiven balances over $600 may be reported as taxable income
Negotiate directly with the holder	You can reach a decision maker and have some leverage	Private lenders are not required to offer anything, and most stop working with accounts after charge-off
Hire a debt relief company	Rarely the right call here	Large up front fees, and the standard advice to stop all contact can walk you into a lawsuit
Bankruptcy	True last resort	Private student loans are far harder to discharge than ordinary debt and often survive a filing
Refinance out of default	You are employed and want to repay	You have to qualify with the lender, and not everyone does

Already getting collection calls, or already been served

If a collection agency is calling, refinancing may still be possible. The account being with a collector does not automatically close the door.

If you have been served with a lawsuit, do not ignore it. That is the single most damaging thing you can do. Most states give you roughly 20 to 30 days to file an answer, and missing that window can hand the other side a default judgment, which in many states unlocks wage garnishment. Talk to a consumer or debt defense attorney. Many offer free consultations and legal aid exists in every state.

We are not attorneys and we cannot advise you on a lawsuit. What we can tell you is that resolving the underlying debt is often what the case is actually about, and a lender would generally rather be repaid than litigate.

Read the full guide: being sued over a private student loan

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Can you refinance a student loan that is in default?

For private student loans, sometimes yes. Most lenders decline defaulted loans, but a small number will refinance them into a new fixed rate loan when the borrower is employed and intends to repay. Our lending partner is one of them. Federal loans do not work this way and use consolidation or rehabilitation instead.

Can I refinance a private student loan that has already been charged off?

Often yes. A charge-off is the lender’s accounting decision, not a legal end to the debt, and it does not by itself disqualify you. What matters most is your income and your willingness to repay.

What interest rate would I get?

Rates and terms are set by the lender, not by GradMerge, and they depend on your credit profile, income, and loan type. The goal is a low fixed rate that replaces a defaulted balance with a predictable payment. We do not quote rates, and you should be skeptical of anyone who quotes you one before reviewing your file.

Does GradMerge charge me anything?

No. Not an application fee, not a monthly fee, not a fee at closing. GradMerge is paid by the lending partner, and only if a loan actually funds. There is no scenario in which you pay us.

Is GradMerge a lender?

No. GradMerge is a marketing and referral service. All loans are originated by our licensed lending partner, Alt Lending, LLC, NMLS #2571325, subject to that lender’s approval, terms, and state licensing.

Will refinancing remove the default from my credit report?

No, and be careful with anyone who says otherwise. Refinancing pays off the old defaulted loan, and that account should update to show it was paid. The history of the past delinquency generally stays on your credit report for up to seven years from the first missed payment that led to the default. What refinancing changes is your present situation, not your past.

My loan was sold to a collection agency or a debt buyer. Does that disqualify me?

Not automatically. Many of the borrowers we work with are already dealing with a collector. Tell us who holds the loan now when you check your options.

I am being sued over the loan. Can you still help?

Possibly, but speak with an attorney about the lawsuit itself first, and do not miss your deadline to respond. GradMerge does not provide legal advice. Resolving the underlying debt is sometimes what unlocks a resolution, so it can be worth checking your refinancing options in parallel.

Do I need a cosigner?

Not necessarily. Requirements are set by the lender and depend on your income and credit profile. A creditworthy cosigner can help in some cases.

Does this work for federal student loans?

No. This is for private student loans only. If your loans are federal, refinancing into a private loan would cost you protections you should keep, and there are federal paths out of default that private borrowers do not get. We will tell you that plainly rather than take you somewhere that does not help you.

What states do you serve?

Availability depends on our lending partner’s state licensing, and some states are not currently served. Check your options and we will tell you quickly whether your state is covered.

How long does the process take?

Checking your options takes about a minute. After that, the timeline depends on the lender’s review and on how quickly you can provide income documentation.

Will checking my options affect my credit score?

Filling out the GradMerge form does not involve a credit check. Any credit inquiry happens later, at the lender’s stage, and the lender will tell you what type of inquiry it is before it happens.

I have already been turned down by other refinance lenders. Is this different?

Probably, yes. Mainstream refinance lenders like SoFi, Earnest, and Credible route you to lenders that decline defaulted and charged off loans as a matter of policy. That is the specific gap this exists to fill.

Is this a scam?

Judge it by the things scams cannot survive. We charge you nothing at any point. We name our lending partner and its NMLS number. We tell you that not everyone qualifies. We never tell you to stop paying or stop talking to your lender. Verify Alt Lending, LLC, NMLS #2571325 yourself at the NMLS Consumer Access site before you do anything.

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