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To get a federal student loan out of default, confirm the loan’s status and current holder, then ask which official resolution options are available for your loan. Federal Student Aid lists rehabilitation, Direct Consolidation, a repayment agreement, and payment in full. These routes differ in eligibility, timing, balance, and credit-report effects; none is best for every borrower. Start by checking your account and any collection notices on Federal Student Aid’s default and collections page.
First, confirm that the loan is federal and in default
This process applies to federal student loans, not private student loans. Federal Student Aid says a federal loan generally enters default after at least 270 days without scheduled payments. Check your loan details and status by logging in to StudentAid.gov, and review official notices for the balance, loan type, contact information, and any collection deadlines.
Identify the entity currently handling the default before sending documents or money. Many Department of Education-held defaulted loans are handled by the Default Resolution Group; some commercially held Federal Family Education Loan (FFEL) loans are handled by a guaranty agency. Use the holder or agency shown in your account or official notice, since the right contact depends on the particular loan.
For many Department-held defaulted loans, MyEdDebt.ed.gov is the Department’s official site for account status and payment information. Follow the contact details on your own account if your loan is handled elsewhere.
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Compare the official ways to resolve default
Federal Student Aid lists four general routes. Ask the loan holder which are available for your loan and what each would mean for active collection, your total balance, credit reporting, and repayment afterward.
| Option | What it involves | Main trade-off |
|---|---|---|
| Rehabilitation | Sign a rehabilitation agreement and make the required qualifying payments. The rules differ by loan type; see the details below. | It takes multiple months. After you complete the required payments, the Department requests removal of the default record from your credit history, but previously reported late payments can remain. Federal Student Aid |
| Direct Consolidation | Apply for a Direct Consolidation Loan through Federal Student Aid if eligible, and meet the applicable requirements. | It may resolve default faster than rehabilitation, but capitalized interest and collection costs can increase the balance. The default record may remain on your credit history. Federal Student Aid |
| Repayment agreement | Make an agreement with the holder and follow its terms and any notice-specific deadlines. | The default record remains on your credit history. Ask the holder what collection actions, if any, the agreement affects and when. Federal Student Aid |
| Pay in full | Pay the holder’s stated payoff amount according to its instructions. | This can resolve the default, but may not be financially feasible. Get the exact payoff amount and payment instructions from the official holder. Federal Student Aid |
How rehabilitation works
Rehabilitation is a sequence of qualifying payments under a signed agreement with the loan holder. For Direct Loans and FFEL loans, you must make nine qualifying voluntary payments within 10 consecutive months. For Perkins Loans, you must make nine consecutive payments. These are program requirements described by Federal Student Aid.
How the payment is set
The standard rehabilitation payment is 15% of your annual discretionary income divided by 12. If that amount is unaffordable, ask the holder about an alternative payment amount and the income documentation it will accept. Federal Student Aid says borrowers may be asked to submit a recent tax transcript or a copy of their most recent federal tax return. Confirm the required documents and payment schedule with the entity handling your loan.
What happens to the default record
After the ninth qualifying rehabilitation payment, the Department requests removal of the default record from your credit history. That does not erase older late-payment information, and it is not a promise of a particular credit-score increase. Ask the holder how it will confirm completion and when to check that your loan status has changed.
How consolidation differs
Direct Consolidation can be a faster resolution route than completing rehabilitation payments, but speed alone does not determine whether it is the right choice. Capitalized interest and collection costs may increase what you owe, and the default record may remain on your credit history. Your eligibility and the terms of the new loan depend on your circumstances.
Use the current application and instructions available through Federal Student Aid, and read the terms before applying. The Department’s Direct Consolidation Loan application and promissory note is an official form; confirm on StudentAid.gov that you are following the current application process rather than relying on an older saved copy.
Act quickly if you receive a garnishment or tax-offset notice
Default can lead to collection, including administrative wage garnishment or a Treasury offset, subject to applicable notices and procedures. Federal Student Aid says up to 15% of disposable pay may be subject to administrative wage garnishment. If you receive a notice, contact the official holder promptly and ask about the deadline, the action being proposed, and whether your chosen resolution route affects that action.
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Do not assume that starting an application immediately stops a garnishment or offset. The timing and any protection depend on the account, route, and notice. Keep copies of notices, agreements, submitted documents, payment confirmations, and notes from calls. For general collection information, see Federal Student Aid’s default and collections guidance.
Follow this sequence to get started
- Log in to StudentAid.gov. Check loan status, type, balance, servicer or holder details, contact information, and your address on file. Review official notices for deadlines. Federal Student Aid guidance
- Contact the entity handling the default. Use the holder or guaranty agency identified in your account or notice; do not assume every federal loan goes to the same office.
- Compare your available routes. Ask about eligibility, payment amount, costs or interest capitalization, credit reporting, active collection, and how the loan will be repaid after default is resolved.
- If choosing rehabilitation, document the agreement. Submit the requested income information, get the payment amount and schedule in writing if possible, and keep proof of each payment.
- If choosing consolidation, use the current official process. Review the current application terms and how the new loan will be repaid before submitting. Do not rely on outdated repayment-plan advice.
- Verify completion and arrange repayment. Check with the holder that the account’s status has changed, then contact the servicer or other entity handling the loan about the repayment terms available to you.
Plan for repayment after default is resolved
A loan that remains in default is not eligible for an income-driven repayment plan, according to Federal Student Aid’s income-driven repayment FAQ. After resolution, repayment choices depend on loan type and the rules in effect at that time. Those rules are changing, so verify current eligibility and plan terms directly with Federal Student Aid and your servicer instead of assuming a particular plan will be available.
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Fresh Start is no longer open
The Fresh Start program ended on October 2, 2024, according to Federal Student Aid. It is not a current enrollment option; borrowers should ask about the resolution routes currently available for their loans.
Avoid paid default-rescue pitches
The Department’s Default Resolution Group does not charge borrowers for its services. Be cautious of companies asking for enrollment, subscription, or maintenance fees to get a federal loan out of default. Use StudentAid.gov, MyEdDebt.ed.gov when applicable, the holder listed on your account, and official notices rather than paying an intermediary who promises to speed up government action.
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