Getting out of student loan default in 2026

A federal Direct or FFEL loan is in default once you have gone 270 days without a scheduled payment, and you can get it out of default in two ways: rehabilitation (nine affordable payments, after which the default comes off your credit report) or consolidation (faster, but the default stays on your record). Both are free.

Right now there is a breathing space. On January 16, 2026, the Department of Education delayed involuntary collections, meaning wage garnishment and the seizure of tax refunds, while it puts the new repayment rules in place. As of October 24, 2026, the collections page on studentaid.gov still says both are paused. No restart date has been set, and the Department is still reporting defaults to the credit bureaus, so the pause isn’t a reason to wait.

What default sets off

When a loan defaults, studentaid.gov lists what follows. The whole balance becomes due at once. You lose eligibility for more federal aid, including Pell Grants. Your school can hold your transcript. The default goes on your credit report, on top of the late payments already reported from 90 days on. Collection costs can be added to the balance.

When collections are running, the government can take your federal and state tax refunds and part of your Social Security, and order your employer to withhold up to 15% of your disposable pay without going to court. You get written notice first: 65 days before a Treasury offset, 30 days before garnishment, with the right to ask for a hearing.

One gap in the pause: it covers loans the Department holds. Older FFEL loans held by a guaranty agency were cleared to resume collections in April 2025, and the January 2026 announcement doesn’t mention them. If your defaulted loan is with a guaranty agency, ask them directly whether they are garnishing.

Rehabilitation: nine payments and a clean credit line

You sign an agreement with your loan holder and make nine voluntary payments, each within 20 days of its due date, over 9 or 10 consecutive months. Do that and the loan leaves default, and the default record itself is removed from your credit history. The late payments reported before the default stay.

The payment is set from your income, not your balance. Your loan holder takes 10% or 15% (depending on when you borrowed) of the amount your adjusted gross income exceeds 150% of the federal poverty guideline for your family size, and divides by 12. A single person in the 48 states earning $30,000 would pay roughly:

Step	Amount
AGI	$30,000
150% of the 2026 poverty guideline for one person	$23,940
Income above that line	$6,060
15% of it, divided by 12	about $76 a month
10% of it, divided by 12	about $51 a month

If that is still too much, ask for the alternative calculation, which uses your real monthly income minus reasonable expenses. Studentaid.gov says the payment can be as low as $5.

Two details matter. Money taken by garnishment or offset doesn’t count as one of the nine payments, because those payments have to be voluntary. And until July 1, 2027, each loan can be rehabilitated only once. From that date, Public Law 119-21 (section 82003) allows two rehabilitations per loan.

Once you finish, you choose a repayment plan. That is the moment to run your numbers in the calculator, because your rehabilitation payment and your new plan’s payment can be very different.

Consolidation: faster, with a catch

You can roll a defaulted loan into a new Direct Consolidation Loan. You either agree to repay it under an income-driven plan, or make three on-time, full, voluntary monthly payments on the defaulted loan first. It’s usually much faster than nine months of payments.

The catch is the credit report. The default and the late payments before it stay on your record. And the new loan follows the new rules: a consolidation loan made on or after July 1, 2026 can use only the Repayment Assistance Plan for income-driven repayment, and a consolidation that includes a Parent PLUS loan can’t use any income-driven plan. You also can’t consolidate while a garnishment order or court judgment is in place.

	Rehabilitation	Consolidation
Time	9 payments over 9 to 10 months	As long as the application takes to process
Default removed from credit report	Yes	No
Payment while you do it	Income-based, as low as $5	Your new plan’s payment
Limit	Once per loan (twice from July 1, 2027)	Not if a garnishment order or judgment is in force
Plans afterward	Your existing loan’s options	New-loan rules (RAP only for income-driven)

Where to start

Call the Department’s Default Resolution Group at 1-800-621-3115 (TTY 1-877-825-9923) for loans the Department holds, or the guaranty agency named on your collection letters for FFEL loans. Ask for a rehabilitation agreement and have your latest tax return ready. If a company reaches you first and asks for an enrollment or monthly fee to do this, read this before you pay anything.