How to remove student loans from default

Understanding the Growing Risk of Student Loan Default

For many Americans with student loans, the possibility of default is becoming an increasingly urgent concern.

According to Federal Student Aid, over five million borrowers had defaulted on their federal student loans by June 2025. An additional four million are seriously delinquent and could soon default as well.

Defaulting on a student loan can have severe consequences, including accumulating interest, wage garnishment, and the loss of tax refunds. While in default, you lose access to further federal student aid and benefits like deferment or forbearance, and your credit score may take a significant hit.

If you haven’t defaulted, it’s crucial to stay current on payments. If you’re already in default, taking prompt action can help you recover.

Delinquency vs. Default: What’s the Difference?

Missing a student loan payment immediately puts your loan into delinquency. However, a single missed payment doesn’t always lead to lasting problems. If you catch up quickly or contact your loan servicer, you may be able to avoid further issues through options like deferment or forbearance.

After 90 days of missed payments, your delinquency is reported to the credit bureaus, which can lower your credit score and leave a mark on your credit report for years.

Allowing your loan to remain unpaid increases the risk of sliding into default.

When Does a Student Loan Enter Default?

The timeline for a loan to move from delinquency to default depends on the type of federal student loan you have:

• William D. Ford Federal Direct Loan Program: This includes Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation Loans. These loans are considered in default after 270 days without payment.
• Federal Family Education Loan (FFEL) Program: Last issued in 2010, this program covered Subsidized and Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. These also default after 270 days of nonpayment.
• Federal Perkins Loan Program: These low-interest loans, last distributed in 2017, may have stricter default criteria. In some cases, missing just one payment can trigger default.

Steps to Remove Federal Student Loans from Default

If your loan has defaulted, your first step should be to contact your loan servicer. You can find their information by logging into your account at StudentAid.gov.

Paying off your loan in full is the most direct way to resolve a default, but this isn’t realistic for most borrowers. Other solutions include loan rehabilitation and loan consolidation. The best option for you will depend on your specific loan type and financial situation, so discuss your circumstances with your servicer.

Loan Rehabilitation

Through a rehabilitation program, you can work with your servicer to remove your loan from default and have the default status erased from your credit report. This is often the preferred route if you’re eligible and want to minimize long-term credit damage.

The requirements for rehabilitation vary by loan type:

• Direct Loans and FFEL Loans: You must agree to make nine on-time monthly payments (within 20 days of the due date) over a 10-month period. The payment amount is typically 10% to 15% of your monthly income, as determined by your servicer.
• Perkins Loans: You’ll need to make nine consecutive, full monthly payments (within 20 days of the due date), with the amount set by your servicer.

Keep in mind, you can only rehabilitate a loan once. If you default again, you’ll need to pursue a different solution.

Starting July 1, 2027, borrowers will have the opportunity to rehabilitate a defaulted loan twice, due to updates from the One Big Beautiful Bill Act.

Loan Consolidation

Consolidating your defaulted federal loan combines your outstanding balance and interest into a new Direct Consolidation Loan. You’ll then agree to repay this new loan under an income-driven repayment (IDR) plan based on your earnings.

Alternatively, you can make three consecutive, on-time payments on your defaulted loan before consolidating. The payment amount must be reasonable and affordable, as determined by your servicer. After consolidation, you can select any repayment plan you qualify for, including IDR.

Once your loan is consolidated and you begin repayment, you regain access to federal loan benefits like deferment, forbearance, and forgiveness. However, the default will still appear on your credit report.

Default and Student Loan Collections

As of May 2025, the Department of Education has resumed collection efforts on defaulted federal student loans, ending a pause that began in 2020. If your loan defaults, the entire balance may become due immediately. Your servicer can then garnish your wages or withhold your tax refund and other federal payments to cover your debt.

You’ll be notified before these actions occur and can still resolve your default through consolidation or rehabilitation to prevent wage or payment garnishment.

If your wages are already being garnished, you may not be able to consolidate until the garnishment order is lifted. If you choose rehabilitation, wage garnishment or tax refund withholding may continue until your loan is out of default or you’ve made at least five rehabilitation payments.

How to Resolve Default on Private Student Loans

Private student loans can also go into default after several missed payments, typically after 120 days, though the exact timeline depends on your lender.

Unlike federal loans, private loans aren’t eligible for federal rehabilitation or consolidation programs. Your lender or the collection agency managing your loan can inform you about available options, such as reduced payment plans. It’s important to contact them quickly after defaulting to avoid additional fees and further credit damage.

This article was revised by Alicia Hahn.