School & Education
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As of May 5, 2025, the US Department of Education restarted collection actions on federal loans that are in default. If your loans are in default, it means you have failed to repay your loans according to the terms you agreed to. Once you default on your loans, the entire amount, including any interest, becomes due immediately. The federal government can then take that amount from your wages, taxes, or any benefits you get.
The federal government will only collect loans that are held by the US Department of Education (ED). To find out if your loans are held by ED,
- Log in to your FAFSA account,
- Go to the “My Loan Servicers” section, and
- See if you have a servicer name that starts with “DEPT OF ED.”
You can also visit ED’s Default Resolution website or contact ED’s Default Resolution Group for more information on your defaulted loans.
What to do after you have defaulted on your loans
There are several options available to you if you have defaulted on your loans. Make sure to communicate directly with your loan servicer and beware of any scammers trying to charge you to use their services. Your loan servicer can give you options to help you get out of default.
To get out of default, you can either:
- Repay the defaulted amount in full,
- Rehabilitate your loans, or
- Consolidate your loans.
Repay in full
One option for getting out of default is to pay your entire loan amount in full. You will need to make this payment to your loan holder. You can log in to your FAFSA account to find your loan holder’s contact information.
You can avoid a negative credit report by paying the full amount within 65 days (the date listed on the notice you received). Contact the Default Resolution Group or visit ED’s Debt Resolution website to confirm the amount you must pay.
If you repay the full amount after the 65 days have passed, the defaulted loan will remain on your credit report for seven years, but it will have a zero balance.
Rehabilitation
Rehabilitating your loans means working out an agreement with your loan holder to make a series of on-time payments and get out of default. It might take you several months to rehabilitate your defaulted loans. To start this process, you must contact your loan holder. You can log in to your FAFSA account to find out who your loan holder is.
There are different requirements for rehabilitation depending on your loan type and who holds your loan. For example, a Federal Direct Loan has different requirements from a Federal Perkins Loan.
To rehabilitate Direct Loans and Federal Family Education Loans (FFEL), you must:
- Agree in writing to make nine monthly payments within 20 days of the due date, and
- Make all nine payments during a period of 10 back-to-back months.
To rehabilitate a Federal Perkins Loan, you must:
- Make a payment each month within 20 days of the due date, and
- Make these payments for nine back-to-back months.
Your loans may still be taken from your wages, taxes, and other benefits even after you begin making payments under a rehabilitation agreement. These involuntary payments will not be counted towards your rehabilitation payments.
After you have made the required rehabilitation payments, your loans will no longer be in default, and they will no longer be taken from you involuntarily. You will also be able to regain benefits that were available before you defaulted, such as deferment and loan forgiveness. The defaulted loans will also be removed from your credit history.
Consolidation
You may choose to consolidate your defaulted loans. Consolidating your loans means combining your loans into a new loan. Applying for loan consolidation is usually a quicker process. Keep in mind that you might end up paying more than you would if you did not consolidate your loans. This is because the interest will likely be higher.
To consolidate your loans, you must either:
- Agree to repay the new Direct Consolidation Loan under an Income-Driven Repayment (IDR) plan, or
- Make three monthly payments in a row on the defaulted loan before you consolidate it.
Your loan holder will determine the required amount for your three payments. The amount must be reasonable and affordable based on your financial situation.
You cannot consolidate a loan that is being involuntarily collected unless the wage garnishment order has been lifted or the judgment against you has been vacated.
After you have repaid your defaulted loans through consolidation, you may be eligible for benefits like deferment and loan forgiveness. Keep in mind that the defaulted loan will still be on your credit history if you choose the consolidation option.
Learn more
For more information on what options are available to you if you have defaulted on your loans, visit:
