How do you get a federal student loan out of default?

Summary

Most borrowers use one of two routes: loan rehabilitation, which takes nine payments over nine or 10 months, or consolidation into a new Direct Consolidation Loan, which is faster. Only rehabilitation removes the default record from your credit history. Wage garnishment and Treasury offset have been on hold since January 2026, but the default itself and the credit reporting stay in place.

What default means

A Direct or FFEL loan is in default once you've gone at least 270 days without a scheduled payment. The whole unpaid balance and interest become due at once. You lose deferment, forbearance, and your choice of repayment plan, and you can't get new federal aid such as Pell Grants. The default goes to the credit bureaus, you can be charged collection fees, court costs, and attorney's fees, and your school may hold back your official transcript. After 360 days of delinquency, the loan moves to the Default Resolution Group.

Rehabilitation

Agree in writing to nine voluntary monthly payments. The loan holder sets the amount based on what's reasonable and affordable, and it can be as low as $5.
Make each payment within 20 days of its due date, all nine within nine or 10 consecutive months, depending on the loan type.
Once the ninth payment posts, the loan is out of default.

Garnishment or offset can keep running until you've made five rehabilitation payments, and money taken that way doesn't count toward the nine. When it's done, the default record comes off your credit history. Late payments reported before the default stay.

Rehabilitation is a one-time option under current rules. Starting July 1, 2027, the law allows two rehabilitations per loan.

Consolidation

Consolidation pays off the defaulted loan with a new Direct Consolidation Loan. To qualify you either agree to repay the new loan on an income-driven plan or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan first. A few limits apply:

Unpaid interest is added to the principal, so future interest is charged on a larger balance.
A consolidation loan made on or after July 1, 2026 has one income-driven option, RAP, and none at all if a parent PLUS loan went into it.
A loan being collected through wage garnishment or under a court judgment can't be consolidated until the order is lifted or the judgment vacated.
The default record stays on your credit history, and late payments stay for seven years from when they were first reported.

Paying the balance in full is the third way out.

The 2026 collections pause

In January 2026 the Education Department delayed administrative wage garnishment and the Treasury Offset Program while it rolled out the repayment changes from the 2025 law, without saying when collections would resume. StudentAid.gov's collections page says both are currently paused. Under the normal rules, the department can take up to 15% of disposable pay without going to court, and a Treasury offset notice goes out 65 days before withholding starts. The same announcement notes that the department reports defaults to the credit reporting agencies.

Private loans

None of these federal timelines apply to private student loans. According to the CFPB, private loans often default after four missed monthly payments, or 120 days, and collection follows the loan contract and state law. On the federal side, getting out of default costs nothing when you go through the loan holder, so a company that bills you to do it is selling something free.

Sources

Written by Kaz (pen name). Figures are copied from the sources' published pages on the dates shown. We have not used these products. Corrections: contact form.