How To Get Out Of Student Loan Default

Student loan default doesn't mean your credit is ruined for life. Missed payments and a default will show up on your credit report and pull your score down, by 91 points on average according to New York Fed research, but there are steps you can take to get the default removed and repair your score along the way.

The timing matters right now. The Department of Education paused involuntary collections on January 16, 2026, and your loan is still in default during the pause.

When collections restart, defaulted borrowers face wage garnishments, student loan tax refund offsets, and Social Security offsets again. The pause is the best window in years to fix this before it costs you.

These are the three paths out of federal student loan default. Picking the right one is the first step, because the choice affects your credit report and, since July 1, 2026, which repayment plans you can use afterward.

The three paths are:

1. Paying off the student loan balance in full
2. Student loan consolidation
3. Student loan rehabilitation

The fastest way is to pay the loan off in full. For most people, that isn't practical. If you want to try for less than the full balance, ED has limited authority to compromise federal student debt, usually by waiving collection fees or part of the interest in exchange for a lump sum.

That leaves rehabilitation and consolidation for most borrowers. Here's how they compare in 2026:

The last two rows are the new part. Any Direct Consolidation Loan made on or after July 1, 2026 can only be repaid under the Repayment Assistance Plan or the Tiered Standard Plan. If your loans are older and you'd rather keep access to IBR, which forgives after 20 or 25 years instead of RAP's 30, rehabilitation keeps that door open and consolidation closes it.

Given the credit-report benefit and the plan flexibility, this article focuses on rehabilitation. Rehabilitation can only be used once per loan until July 1, 2027, so make sure you're financially ready, which is what we'll cover next.

You'll need to make nine on-time payments within 10 months. Get your budget in order before you sign the agreement so you don't miss one. One late payment can reset the process.

Start by listing your take-home pay and fixed costs, then carve out the rehab payment before anything discretionary. Rehab payments are often lower than people expect, sometimes $5 a month, so the real work is making sure the payment happens every month, not finding a large sum.

If you aren't already using a budgeting app or spreadsheet, now's a good time. It'll help you plan the next 10 months of rehabilitation payments, track spending against your payment budget, and remove the guesswork. Our Student Loan Calculator can also show what your payment will look like once you're out of default and on RAP.

For loans held by the Department of Education, start online. The Defaulted Loans Support Center at studentaid.gov/default-support/ lets you compare rehabilitation and consolidation, apply for either one, upload documents, and make payments, all with the same StudentAid.gov login you already use. You no longer need a separate MyEdDebt account or a fax machine.

If you'd rather talk to someone, or the portal doesn't show your loans, contact your defaulted loan servicer and tell them you want to rehabilitate. If you're not sure who holds your loans, here's how to find out who owns your student loans.

Your loan holder calculates your monthly payment from your income. If the amount doesn't fit your budget, you can ask for a lower payment by submitting your income and expenses. That's a right under the program, not a favor, so ask for it in writing.

Your student loan may also be with a debt collector if you've been in default a long time. Here's the list of student loan debt collectors and how to contact them. Older FFEL loans held by a guaranty agency are handled by that agency, and Tate Law reports that guaranty agencies aren't covered by ED's collections pause. Our consolidation explainer covers FFEL loans in more detail.

You sign a rehabilitation agreement with your loan holder, and once it's approved, you start making payments. For ED-held loans, you can sign the agreement electronically and make your payments through the Defaulted Loans Support Center. You can see your loans and your current holder on StudentAid.gov. Read the full rehabilitation rules before you sign.

Your payment starts at 15% of your discretionary income, meaning your adjusted gross income above 150% of the federal poverty guideline for your household size, divided by 12. The minimum is $5 a month. If that formula produces a payment you can't afford, you can request an alternative amount based on your income and expenses. Starting July 1, 2027, the minimum rises to $10.

You must make nine payments within 10 consecutive months, and each must arrive within 20 days of the due date. You can't prepay all nine at once; the point is to show you can make monthly payments again. Once the ninth payment posts, the default is removed from your credit report and the loan moves back to a regular servicer. The missed payments that led to default stay on your report for seven years.

When collections are running, garnishment can continue while you make rehab payments. Collections are paused as of September 30, 2026, but if they restart before you finish, your budget has to cover your rehab payments plus any wage garnishment. That's why step 2 matters.

Tax refunds work the same way. Several readers below were told by collectors that after five payments their refund was safe. Until rehabilitation is complete, you're still in default, and a refund can still be offset when offsets are running. The tax offset explainer covers the notice and appeal process.

Once you're out of default, pick a repayment plan right away and set up automatic payments. Autopay drafts your payment on the due date every month, so you never miss one, and on RAP the interest waiver and $50 principal match only apply to full, on-time payments.

If all your loans were disbursed before July 1, 2026, compare RAP and IBR before choosing. If you work for a government or nonprofit employer, check whether your new payments can count toward Public Service Loan Forgiveness. Log in to StudentAid.gov to confirm your balance and that your payments are posting.

Stay on top of your loan holder while your paperwork is processed. Confirm everything in writing. The Consumer Financial Protection Bureau has documented problems with rehabilitation processing, including delayed applications, miscalculated payments, and garnishment orders that weren't lifted on time. If your credit report still shows the default after rehab is complete, dispute it with the credit bureaus.

What About Private Student Loans In Default?

Everything above applies to federal loans. Private student loans don't have rehabilitation, consolidation out of default, or income-driven plans. Private loans typically default after 120 to 180 days of missed payments, depending on the lender, compared with about 270 days for federal loans. Read our explainer on consolidating versus refinancing if you're sorting out which of your loans are which.

A private lender or its collection agency can report the default and pursue collection, and it can sue you within your state's statute of limitations. Unlike the federal government, a private lender needs a court judgment before it can garnish wages. Check the student loan statute of limitations in your state before you make a payment on an old private debt, since a payment can restart the clock in some states.

The CFPB's advice is to contact your lender or servicer as early as possible to ask for a modified payment plan or a settlement. If someone cosigned, the lender can come after them too. Our list of student loan debt collectors shows who you may be dealing with.

Frequently Asked Questions

Will They Take My Tax Refund While I'm In Rehabilitation?

When offsets are running, they can, until rehabilitation is complete. Tax offsets are paused as of September 30, 2026, but it's likely they will return for tax season. If you're owed a refund and in the middle of rehab when offsets resume, the safe move is to finish rehab before you file. Here's what to expect for your refund this year.

Can They Take My Spouse's Refund Or Garnish My Spouse's Wages?

They can't garnish a spouse's wages for your federal loans. On a joint return, the whole refund can be offset, but your spouse can file Form 8379 (Injured Spouse Allocation) to recover their share. The student loans and taxes explainer walks through it.

Can I Settle A Defaulted Federal Student Loan?

Sometimes, and only for less than you'd hope. ED can waive collection fees or part of the interest in exchange for a lump-sum payment, but it rarely reduces principal. Here's when ED can compromise federal student debt.

I Already Rehabilitated Once And Defaulted Again. Now What?

Today, consolidation or payment in full are your options. Starting July 1, 2027, borrowers can rehabilitate a loan a second time. If your loans predate July 2026 and you want IBR, compare waiting for a second rehab against consolidating into RAP now.

Will Bankruptcy Stop Wage Garnishment On Federal Student Loans?

Rarely. Federal student loans can only be discharged in bankruptcy by proving undue hardship in a separate court proceeding. Getting out of default is the reliable way to stop garnishment. Skipping payments on purpose doesn't work either; here's why strategic default always backfires.

Why Is My Credit Score Still Low After Rehabilitation?

Rehabilitation removes the default notation, but not the months of late payments that came before it. Those stay for seven years and fade in impact over time. Make every new payment on time and the score recovers. Our rehabilitation explainer covers what to expect on your report.

Final Thoughts

Getting out of default is the best thing you can do if you haven't been making your student loan payments, and the collections pause makes this the cheapest time in years to do it. Rehabilitation is the better path for most borrowers because it clears your credit report and keeps your repayment plan options open. Consolidation is the right call if you need out fast or you've already used rehab.

Once you're back on track, make every effort to pay off your student loans faster or keep them on the plan that fits your forgiveness goal. If your situation is tangled (a spouse's loans, old FFEL debt, a forgiveness date in sight), a one-time plan from The Student Loan Planner can be worth the fee.