Frequently Asked Questions

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Managing Loan Default

Did you know your defaulted VSAC FFEL loan will be eligible for a 0% interest rate and pause of certain collection activities?

Relief will be made retroactive to March 13, 2020, the start of the COVID-19 national emergency. For more information, please visit

How do I get my federal student loan out of default?
  • Pay in full with a one-time payment or through a series of large payments.
  • Loan rehabilitation is a one-time offer that lets you make payments based on your current income and overall financial situation. This program helps you get back into repayment on your student loan and removes the default from your credit history.
  • Consolidate with Direct Lending by combining your federal loans into a single consolidated loan. Learn more >
  • Compromise payment. In certain situations, VSAC may accept less than the full amount owed on your loans. Please call our office to discuss this option.
How do I make payments on my defaulted student loan with VSAC?
  • Online payments can be made by establishing a sign-on and password for your MyVSAC account. 
  • Mail payments to VSAC, PO Box 2000, Winooski VT  05404 with your account number noted in the memo section of your check.
  • A bill pay service is generally offered by most banks and is an easy way to set up monthly payments to VSAC.
How do I remove my default through the loan rehabilitation program?

To qualify for the loan rehabilitation program on your federal loan, you need to agree to make 9 on-time monthly payments within 10 months. Upon successful completion of the program, your loan is transferred to a new loan servicer, and VSAC removes the default from your credit history.

To qualify for the private loan rehab program, you need to agree to make 9 on-time monthly payments within 10 months. We'll calculate your qualifying payment amount over the phone at 800-954-2440. The calculation will be based on the loan balance and interest rate. 

Learn more and apply > 

How can I lower my monthly payment amount on my federal loan?

Consider the loan rehabilitation program and use the loan rehab payment calculator to determine your qualifying monthly payment amount.  

You can also apply for a Direct Consolidation loan under an Income-Contingent Repayment plan. Learn more >  

I want to go back to school. How can I regain eligibility for loans and grants?

If you make 6 consecutive approved monthly payments within a six-month period, you'll regain eligibility to apply for federal student aid, including student loans and grants. The loan remains in default after meeting the requirements for renewed federal student aid eligibility, and payments must continue on the defaulted loan while in school.

Will VSAC be getting my tax refund this year? If so, how do I prevent this in the future?

VSAC participates in the Vermont Setoff Debt Collection Program for defaulted Federal Family Education Loans (FFEL) and private loans originated by VSAC. Through this program (sometimes referred to as state tax offset), all or part of a borrower’s state income tax refund, property tax adjustment, and/or renter rebate may be sent to VSAC to be applied to an outstanding defaulted student loan.  

Similarly, FFEL loans are certified for federal tax offset according to rules from the Treasury Department and the Department of Education. This is a mandatory program for FFEL loans.  

You may be able to avoid tax offset by considering one of the repayment options to remove your loan from default. Contact a knowledgeable VSAC collection representative at 800-954-2440 or visit start. VSAC can help!

A portion of my tax refund is based on my spouse’s income. Can that amount be returned to my spouse?

There may be a way for your spouse to recover their portion of your tax refund. Please speak to your tax adviser or the state or federal tax department about an injured spouse claim.

VSAC is taking monthly payments from my wages through my employer. How do I prevent wage garnishment?

You may be able to avoid wage garnishment by considering one of the repayment options outlined above to remove your loan from default. Contact a knowledgeable VSAC collection representative at 800-954-2440 or visit start. VSAC can help!

I'm making payments as agreed on my defaulted loan, why am I receiving a letter regarding tax offset?

VSAC provides notification of tax offset as required by state and federal requirements. However, if you're making regular monthly payments toward your defaulted student loan(s) with VSAC—in an amount acceptable to VSAC and without interruption—you can generally avoid inclusion in the tax offset program.

Am I eligible for loan forgiveness?

Forgiveness, cancellation, or discharge means that you no longer have to repay some or all of the money you borrowed. To take advantage of a forgiveness option, you must qualify for a program such as Total and Permanent Disability. To learn more about the types of forgiveness, cancellation, and discharge available for the different types of federal student loans, visit the Department of Education’s Federal Student Aid website.

Are all my federal student loans held by VSAC?

For information on your federal loans, including your current holder, visit