Student Loan Default: How to Get Out and Back on Track

Miss a federal student loan payment and you’re delinquent the very next day. Go 270 days without a payment and the loan is in default. That second line is the one that hurts, because default costs a lot more than a late payment ever will.

Default is fixable, though, and getting out doesn’t cost you anything but the payments. Here’s how it works, what getting out actually costs each month, and what to do if you’re behind but not in default yet.

Late, delinquent or in default: which one are you?

These words get used like they mean the same thing. They don’t, and the days matter.

Perkins Loans play by different rules. The school holding a Perkins Loan can call it in default after a single missed payment.

Not sure where you stand? Log in to StudentAid.gov and look at who’s servicing each loan. If it says Default Resolution Group, that loan is in default. Our guide to student loan servicers walks through finding yours.

What default actually does to you

Once a loan defaults, the entire balance is due at once. That’s called acceleration, and it’s what turns the government’s collection tools on.

• The default goes on your credit report, which makes a car loan, a credit card or an apartment harder to get.
• You lose deferment, forbearance and your choice of repayment plans, and you can’t get new federal student aid.
• The government can take your federal and state tax refunds and some federal benefits, including Social Security, through what’s called Treasury offset.
• Your employer can be ordered to hold back up to 15% of your disposable pay, without a court case.
• You can be sued. Collection costs may be added to what you owe, and your school can hold your transcript.

If a notice does show up, act on it. A notice of intent to offset gives you 65 days to set up a payment plan, rehab or consolidation, or to object. A garnishment notice gives you 30 days. Keep your address current with your servicer so the mail actually reaches you.

Bottom line: the pause buys you time. It doesn’t fix anything.

The three ways out of default

You’ve got three ways out: rehabilitate the loan, consolidate it, or pay it off. Most people pick one of the first two, and here’s how they compare.

Option 1: Rehabilitation (usually the better pick)

With rehab, you agree in writing to make nine voluntary monthly payments, each one within 20 days of its due date, over 10 consecutive months. After the ninth payment, the loan’s out of default.

Why it’s usually the better pick: the record of the default comes off your credit history. The late payments reported before the loan defaulted stay, but the default itself goes. You also get back deferment, forbearance, your choice of plans, forgiveness options and federal student aid.

So how’s the payment set? Your loan holder takes 10% or 15% of your discretionary income and divides it by 12. Which percentage you get depends on when you took out your loans. Discretionary income here is your adjusted gross income (AGI) from your latest tax return, minus 150% of the federal poverty guideline for your family size and state. You’ll have to send proof of income.

Can’t afford that number? Ask for the other calculation. It starts from your monthly income and subtracts reasonable monthly expenses, and you’ll need to document both. Then you pick one of the two amounts. Depending on your income, the payment can be as low as $5, and from July 1, 2027 the minimum becomes $10.

See what your own income gives you in the RAP calculator, then compare it with the rehab number your holder offers.

Two things to know before you sign.

Rehab has been a one-time deal for each loan, so if you rehab a loan and default on it again, you can’t rehab it again. Starting July 1, 2027, each loan can be rehabilitated twice over its lifetime.

And if your wages are being garnished when collections are running, the garnishment can keep going until you’ve made five rehab payments. Garnished money doesn’t count toward your nine.

Option 2: Consolidate out of default

Here you take out a new Direct Consolidation Loan that pays off the defaulted one. To qualify, you either agree to repay the new loan on an income-driven plan or make three consecutive, voluntary, on-time full payments on the defaulted loan first.

It’s quicker than rehab. The catch is that the default and the late payments before it stay on your credit history (late payments stay for seven years from when they were first reported). Your unpaid interest also gets added to the balance, so you pay interest on a bigger number from then on.

More on how consolidation works, including the parent PLUS rules, is in our student loan consolidation guide.

Option 3: Pay it off

If you can cover the whole defaulted balance, you can pay it online at the Defaulted Loans Support Center with a debit or prepaid card. Most people can’t, which is why the other two options exist.

Where to do it: the Defaulted Loans Support Center

The Education Department and the Treasury run an online Defaulted Loans Support Center at StudentAid.gov/default-support. You can apply for rehab or consolidation, sign the agreement online, make payments and see your payment history, including anything taken by garnishment or offset.

Rather talk to a person? Default support is 1-800-621-3115 (TTY 1-877-825-9923). They can also set up automatic payments for a rehab agreement, put you on a payment arrangement if rehab and consolidation won’t work, or take a dispute if you think your loan went into default by mistake.

Next stepCompare your options at the Defaulted Loans Support Center

Only behind? Fix it before day 270

If you’re a few payments behind and not in default yet, you have more options right now than you’ll have once the loan defaults. It’s also the cheapest time to deal with it, since nothing hits your credit until day 90.

1. Call your servicer. Tell them you’re behind and ask what it takes to bring the account current. Servicer help is free.
2. Get on an income-driven plan. On RAP, the payment is based on your AGI and can be as low as $10 a month. If your income dropped, this can shrink the bill a lot. Our guide to student loan repayment plans compares every option.
3. Ask about deferment or forbearance if you need a pause. Deferments include unemployment and economic hardship. In a forbearance, interest keeps piling up on every loan type. In a deferment, the government covers interest on subsidized loans only.
4. Turn on autopay once you’re current. It cuts the rate on eligible Direct Loans (originated after July 1, 2012) by 1% through June 30, 2028, if you enroll by December 31, 2026.

One rule to know: loans made on or after July 1, 2027 won’t have unemployment or economic hardship deferment, and general forbearance on them is capped at 9 months in any 24-month period. Loans disbursed before that date keep up to three years each of unemployment and economic hardship deferment.

Working toward Public Service Loan Forgiveness on RAP? A payment that catches up a late bill doesn’t count as on time, so that month won’t count toward your 120.

Your checklist if you’re in default

1. Log in to StudentAid.gov and check who holds each loan.
2. Pull your latest tax return. You’ll need your AGI and proof of income.
3. Pick your route. Rehab if your credit matters and you can give it 10 months, consolidation if you need out faster and can live with the default staying on your credit history.
4. Apply at StudentAid.gov/default-support or call 1-800-621-3115.
5. If the payment they offer is too high, ask for the income-and-expenses calculation instead.
6. Set up automatic payments and make each one within 20 days of its due date.
7. Choose a repayment plan the day you’re out so you don’t slide back in.
8. Check your credit reports after rehab to make sure the default record is gone.

Rebuilding after a default takes a while. These ways to improve your credit score help once your loans are back in good standing.

What to avoid

Companies that want “enrollment,” “subscription” or “maintenance” money to get you out of default. Walk away. Everything they’d do, your loan holder does for free, and the official getting-out-of-default page says so in plain words.

Waiting for Fresh Start. That program ended in October 2024 and isn’t available anymore.

Ignoring the mail. When collections are running, every notice comes with a deadline, and a missed 30-day window on a garnishment notice is a rough way to learn that.