How to Get Out of Default on Your Federal Student Loans

Learn about your options for getting out of default on your federal student loans.

Updated by , Attorney

Generally, defaulting on your federal student loans can lead to severe consequences, like tax refund offsets and federal benefits intercepts (sometimes called "Treasury offsets"), wage garnishment, and the loss of eligibility for deferment, repayment plans, and probably forbearance. You might also find continuing your education or returning to school difficult because the Department of Education can deny you eligibility for new education grants or loans.

But most borrowers get a reprieve from many of these actions during the COVID-19 pandemic. Also, borrowers who are delinquent or in default will receive a fresh start—their loans will be automatically returned to good standing, and any delinquency will be cured.

If, after that time, you go into default on your federal student loans, you might be able to resolve the matter by rehabilitating your loans or consolidating them.

Help for Borrowers With Federal Student Loans During the COVID-19 National Emergency

In 2020, the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act initially suspended payments and waived interest for federal student loans held by the U.S. Department of Education for six months. This pause has been extended many times. On November 22, 2022, the Biden Administration announced that the Education Department will extend the suspension while its student loan debt cancellation program is tied up in the courts. Payments will resume:

  • 60 days after the debt cancellation program is implemented
  • 60 days after the lawsuits are resolved, or
  • 60 days after June 30, 2023, if the program has not been implemented and the litigation has not been resolved by then.

Borrowers will have their payments automatically suspended without penalty or accrual of interest. Collection actions, wage garnishments, and Treasury offsets for defaulted federal student loans are also paused.

Another benefit is that millions of borrowers who defaulted on their federal student loans will have their loans restored to good standing, and any delinquency will be cured.

But nondefaulted FFEL-Program loans held by entities other than the U.S. Department of Education, Perkins loans that aren't held by the U.S. Department of Education, and private student loans aren't included in the suspension.

How to Get Out of Default: Rehabilitation and Consolidation

If you go into default on your federal student loans, you might be able to resolve the matter by rehabilitating your loans or consolidating them. Unlike most other kinds of loans, you have the right to get out of default on your federal student loans through rehabilitation or consolidation.

What It Means to Default On Your Federal Student Loans

If your FFEL or Direct Loan payments are due monthly, default will occur after 270 days—about nine months—of missed payments. If your payments are due less frequently than monthly, default occurs after 330 days of missed payments, about 11 months.

But a Perkins loan is in default as soon as you miss a payment or violate any other term of the payment agreement.

Rehabilitating Your Federal Student Loans to Get Out of Default

To rehabilitate a defaulted student loan, you must make nine payments within 20 days of the due date over the course of ten months. The servicer will set the amount of the payments. (Under the initial payment suspension, if you were already in a rehabilitation agreement, suspended payments starting March 13, 2020, will count towards the rehabilitation. If you enter into a new rehabilitation agreement after that date, suspended payments that would have been made from the beginning of your agreement until the end of the suspension will count.)

How the Servicer Determines Your Payment Amount

You must submit information about your income, and the servicer will calculate a "reasonable and affordable" monthly payment based on that information and the federal poverty guidelines. First, the servicer will find 150% of the poverty level for your family size. Then, the servicer will then determine your "discretionary income" by subtracting the amount from your adjusted gross income (AGI) in your most recent tax return. The payment will be equal to 15% of your discretionary income.

What to Do if the Payment is Still More Than You Can Afford

If the amount is still more than you can afford, you may submit documentation of your expenses. The servicer can determine a lower payment by deducting reasonable expenses. In all cases, the payment must be at least $5 per month.

What Happens Once the Payment is Set

Once your payment has been set, your servicer will send you documentation of the payment amount and may require a rehabilitation agreement. Collection fees usually will continue to accrue on your loan as long as it is in default and can be as much as 18.5% of the loan balance. These fees are in addition to the interest, which will also normally continue to accrue.

How Rehabilitating Your Federal Student Loans Affects Your Credit

After you complete your rehabilitation payments, the loan will no longer be in default. The servicer will remove all references to the default status from your credit report. But late payments will continue to be reported.

Federal Student Loan Consolidation to Get Out of Default

Nearly all defaulted federal student loans can be consolidated into a Direct Consolidation Loan. Combining your student loans through consolidation is a faster and cheaper way to get out of default on federal student loans than rehabilitation. You don't have to pay fees to consolidate your loan, and consolidation should be completed in fewer than six months. So, collection fees will accrue for a shorter amount of time than under a rehabilitation plan.

If you consolidate into a Direct Consolidation Loan before the end of the suspension, the new consolidation loan will automatically be placed in a forbearance (payments are suspended) until it ends. But once the 0% interest rate period ends, the interest rate on your loan might be higher than what you were paying before you consolidated.

To consolidate (or to start a loan rehabilitation arrangement related to your defaulted federal student loans), even during the coronavirus crisis, contact the Department of Education's Default Resolution Group, or call them at 800-621-3115 (TTY for the deaf or hearing-impaired 877-825-9923) for assistance. Learn more at and at the Federal Student Aid's coronavirus website.

Though, be sure to consider the pros and cons of federal student loan consolidation before taking this step.

You Get to Pick the Servicer

When you consolidate, you must choose a servicer for your loan. This opportunity can be an advantage if you've had a bad experience with your current servicer. You will also select a repayment plan.

Requirements for Federal Student Loan Consolidation

You'll have to make three payments before consolidating unless you choose an income-based repayment plan (IBR, PAYE, REPAYE, or ICR). If you're married and applying for an income-based repayment plan, your spouse must usually also sign the request. Also, keep in mind that you will have to submit income verification each year that you're enrolled in an income-based repayment plan.

How Federal Student Loan Consolidation Affects Your Credit

The default status of the previous loan, as well as late payments, will remain on your credit report for the full amount of time allowed under the Fair Credit Reporting Act.

Other Ways to Get Out of Default On Your Federal Student Loans

A few other options for getting out of default are getting a discharge, repaying the full loan amount, or refinancing the loan.

Applying for a Discharge of Your Federal Student Loans

In some cases, you might qualify for student loan forgiveness (also called a loan "discharge" or "cancellation"). If you think you qualify for loan forgiveness under one of the many programs, you should apply even if you're in default. Though, you might have to get out of default to qualify.

Paying Off Your Federal Student Loans

If you have money available, it could make sense to pay off the loan.

Refinancing Your Federal Student Loans

Private lenders usually require a cosigner. Depending on the cosigner's credit score, a private lender might be willing to refinance your defaulted loan. Sometimes, it makes sense to refinance a federal student loan as a private loan, but you will lose access to federal repayment plans, repayment incentives, and forgiveness programs. Make sure that it's in your best interest before you do so.

Getting Help

To find out more about how to get out of default, ask your servicer. If you need help dealing with your servicer or need information about your available options, consider consulting with a student loan attorney or debt settlement attorney who deals with student loans.

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