Published by the Modern Lending Solutions editorial team. Last reviewed: .

Short answer: StudentAid.gov lists three ways out of default on a federal student loan: loan rehabilitation, consolidation into a Direct Consolidation Loan, or repaying the loan in full (StudentAid.gov). The quotes below were read on StudentAid.gov on October 30, 2026; check the pages again before you act. This is general information, not legal advice.

When a federal loan is in default

  • For a Direct Loan or FFEL Program loan, “you’re considered to be in default if you don’t make your scheduled student loan payments for at least 270 days” (StudentAid.gov).
  • For a Perkins Loan, the holder may declare the loan in default if you miss a scheduled payment by the due date (StudentAid.gov).
  • Before default, a payment that is 90 days or more late is reported by your servicer to the national credit bureaus (StudentAid.gov).

What default can lead to

StudentAid.gov lists these consequences, among others (StudentAid.gov):

  • The entire unpaid balance and interest become immediately due (acceleration).
  • Tax refunds and federal benefit payments may be withheld and applied to the loan (Treasury offset).
  • Your wages may be garnished.
  • You lose eligibility for deferment, forbearance, a choice of repayment plans and more federal student aid.
  • The default is reported to credit bureaus, and you may be charged court costs, collection fees and attorney’s fees.

Treasury offset

StudentAid.gov says Treasury offset can take federal or state income tax refunds, Social Security payments (including Social Security disability benefits) and other federal payments (StudentAid.gov). A notice of intent to offset is sent to your last-known address first, and you have 65 days, until the date on the notice, to set up a payment arrangement, start rehabilitation, apply to consolidate, pay in full, or object to the debt in writing (StudentAid.gov).

Administrative wage garnishment

  • “Your loan holder can order your employer to withhold up to 15% of your disposable pay to collect your defaulted debt without taking you to court” (StudentAid.gov).
  • Federal rules cap the amount at the lesser of the order amount or the amount by which disposable pay exceeds 30 times the federal minimum wage (34 CFR 34.19).
  • You get a notice 30 days before garnishment starts, and you can ask in writing for a hearing, postmarked within 30 days of the notice date, on the debt itself or on extreme financial hardship (StudentAid.gov).
  • Your employer cannot fire you, refuse to hire you or discipline you because of the garnishment (StudentAid.gov).

Status as read: on October 30, 2026, StudentAid.gov said “Collections through Treasury offset and Administrative Wage Garnishment are currently paused” (StudentAid.gov). Check that page for the current status.

Way out 1: loan rehabilitation

  • For a Direct Loan or FFEL Program loan, you agree in writing to nine voluntary, reasonable and affordable monthly payments, each within 20 days of the due date, made during 9 or 10 consecutive months (StudentAid.gov).
  • Depending on your income, the payment could be as low as $5 a month (StudentAid.gov).
  • Garnishment or offset payments do not count toward the nine payments (StudentAid.gov).
  • After rehabilitation, the record of default on that loan is removed from your credit history, but late payments reported before the default stay (StudentAid.gov).
  • StudentAid.gov calls rehabilitation a one-time opportunity under current rules; see its One Big Beautiful Bill Act updates page for changes it lists.

Way out 2: consolidation

  • You consolidate the defaulted loan into a new Direct Consolidation Loan, and either repay it under an income-driven repayment plan or first make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan (StudentAid.gov).
  • Accrued interest is added to the principal, so you can pay more overall (StudentAid.gov).
  • The record of default stays in your credit history (StudentAid.gov).
  • You cannot consolidate a loan under wage garnishment or a court judgment until the order is lifted or the judgment vacated (StudentAid.gov).

Way out 3: repay in full

Paying the whole defaulted balance also ends the default (StudentAid.gov). Before you borrow to do this, compare what you would give up: see federal student loan vs personal loan.

Private student loans differ

Default rules, rehabilitation and consolidation on this page are federal programs. StudentAid.gov does not include information on private student loans and says to contact the private loan holder (StudentAid.gov). For how garnishment works on other debts, see wage garnishment for an unpaid loan.

Watch for fees

StudentAid.gov says to walk away from a company that asks for “enrollment,” “subscription” or “maintenance” fees to get you out of default, because your loan holder helps for free (StudentAid.gov).

Checklist

  • Find your loan holder on StudentAid.gov, or call the Default Resolution Group.
  • Read any notice and mark its 65-day or 30-day deadline.
  • Compare rehabilitation and consolidation on credit history and timing.
  • Ask about a payment based on your income before you sign.
  • Never pay a third party to get out of default.

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Sources

  1. Federal Student Aid: Student loan delinquency and default (read October 30, 2026)
  2. Federal Student Aid: Collections on defaulted loans (read October 30, 2026)
  3. Federal Student Aid: Getting out of default (read October 30, 2026)
  4. 34 CFR 34.19: amounts to be withheld under a garnishment order (eCFR)
  5. Federal Student Aid: One Big Beautiful Bill Act updates (last updated Aug. 24, 2026)

Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.