The loan can be paid off. However, the only option available is a LUMP SUM payment of the entire loan default amount plus any accrued interest.
Forfeit Outstanding Defaulted Loan:
When a participant incurs a triggering event - turns age 59½, severs from service, is disabled or dies - the owner may request the loan be forfeited, or internally surrendered. A financial hardship is NOT a qualifying reason to forfeit an outstanding loan!
If the contract has a Pre-1987 Grandfathered amount remaining on the contract, this amount is available to withdraw in order to pay off the defaulted loaned amount plus any accrued interest. However, if there is not enough pre-1987 grandfathered amount available to make the total payment, this option is not available. In order to exercise this option, Security Benefit must be notified in writing.