Everything You Need To Know About Student Loan Default
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If you’ve fallen behind on your student loans, it’s important to understand what default means and how to avoid it. Federal loans typically go into default after 270 days of missed payments, while private loans may default sooner. Defaulting on a student loan can lead to serious consequences, including wage and tax refund garnishment, damage to your credit, and loss of access to federal aid. The good news is that many borrowers are able to get out of default through loan rehabilitation or consolidation. This guide walks you through the default process, what to expect, and how to regain control of your student debt.
Written by Mae Koppes. Legally reviewed by Jonathan Petts
Updated August 6, 2025
How Many Days After Missing a Student Loan Payment Do Your Loans Go Into Default?
Each student loan servicer defines the timeline for default for its loans.
Many federal student loans are considered in default after 270 days (about nine months) of missed payments.
Some private student loans consider a loan in default after 90 days (about three months) of missed payments.
Your loan servicer can give you the details about your student loan.
Is Delinquency the Same as Default?
No. There is a difference between a student loan that is delinquent and one that is in default.
Delinquency: A student loan is delinquent as soon as a monthly payment is past due but is not necessarily in default.
Default: If the borrower continues defaulting on payments, then the student loan will go into default.
If you’ve defaulted on your student loans, you’re not alone. Some 3 million borrowers have defaulted on their loans, owing over $86 billion.
What Happens When You Default on a Student Loan?
The consequences of defaulting on a student loan depend on the type of loan you have. Broadly speaking, there are two categories of student loans: federal and private student loans.
Federal student loans are issued by the federal government and their terms and conditions are set by federal law. Private student loans are loans backed directly by banks or other private lenders. The terms and conditions of private loans are set by the lender. What constitutes a default will be defined in your student loan agreement.
If you default on your student loans, the lender may
Accelerate the loan (which means the total loan amount becomes due immediately)
Garnish your wages, which means taking money directly from your paycheck (private lenders must get a court judgment first)
Turn your account over to a collection agency
Report your nonpayment to the major credit bureaus
Additionally, defaulting on federal student loans can result in:
Having your academic transcripts withheld
Having your wages, tax refund, or federal benefits garnished
Losing access to repayment programs and benefits like deferment and forbearance
What Happens if You Default on Federal Student Loans?
If you default on a federal student loan, the entire balance becomes due right away. This is called acceleration. Once a loan is accelerated, you lose access to many helpful repayment benefits.
There are also other serious consequences. Here are the most common consequences of federal student loan default:
You lose access to repayment options. You won’t be able to use deferment or forbearance, and you won’t qualify for income-driven repayment plans.
You’re no longer eligible for federal student aid. This can make it harder to return to school or finish your degree.
Your default is reported to the credit bureaus. This can significantly lower your credit score and affect your ability to borrow in the future.
Your wages may be garnished. The government can take up to 15% of your paycheck without going to court. The Department of Education must send you a notice at least 30 days before wage garnishment begins. You have the right to request a hearing to challenge it or show that it would cause financial hardship. (More on this below.)
Your tax refunds and federal benefits can be taken. This includes Social Security benefits in some cases.
Your school may withhold your academic transcript. Schools decide whether to release transcripts. If your school is also your lender, they may hold your transcript until the debt is resolved.
Your loan may be sent to a collection agency. The Department of Education works with private agencies to collect defaulted loans, and you may have to pay collection fees on top of what you owe.
Can You Get Financial Aid if Your Student Loans Are in Default?
No. You can’t usually get federal financial aid if your student loans are currently in default status. You may be able to get your loans out of default to restore your access to financial aid if you’re still in school. More on this below.
Understanding Tax Refund Garnishment (Tax Offsets)
If you’ve defaulted on a federal student loan, your federal tax refund could be taken to help repay the debt. This process is called a tax refund offset. Only federal student loans are eligible for this type of garnishment. Private lenders can't take your tax refund, but they may try other ways to collect, like suing you in court.
Here’s how a tax refund offset usually works: The Department of Education notifies the Treasury Offset Program (TOP) that your student loan is in default and past due. TOP matches your Social Security number to any federal tax refund you’re owed. If there’s a match, the refund will be sent directly to your loan instead of to you.
Before this happens, you’ll get two notices:
From your loan servicer or collection agency, letting you know that your loan is in default and may be sent to collections.
From the Treasury Offset Program, warning you at least 60 days before your refund is taken. This notice will explain how much you owe, the reason for the offset, and what your options are.
You may be able to avoid or stop the garnishment by:
Rehabilitating your loan. Once you make five on-time monthly payments in a rehab plan, garnishment must be paused while you finish the process.
Disputing the debt if you believe there’s an error or if you've already repaid the loan.
Requesting a hardship refund if the garnishment would cause extreme financial difficulty. This could apply if you’re facing homelessness, permanent disability, or job loss.
Filing an injured spouse claim if part of the refund belongs to a spouse who isn’t responsible for the student loan debt.
You can call the Treasury Offset Program at 1-800-304-3107 or visit the treasury website to learn more about your offset or find out which agency is collecting your debt.
Can You Stop a Student Loan Wage Garnishment Due to Financial Hardship?
Before your wages are garnished, the U.S. Department of Education must send you a notice of intent to garnish. This notice is usually sent at least 30 days before garnishment starts. If you receive this, you have the right to request a hearing to explain why the garnishment would cause serious financial trouble for you or your family.
📃 At the hearing, you'll need to share details about your income and living expenses. It helps to prepare a simple list of your: monthly income (from all sources), housing and utility costs, medical expenses, childcare costs, and any court-ordered payments, like child support.
You may also be asked to show documents like pay stubs, rent receipts, or utility bills to back up your case. If you prove that the garnishment would cause undue hardship, the government may lower the amount they take or stop the garnishment entirely.
Even if you don’t qualify for a hardship reduction, you may still be able to challenge the garnishment if:
The debt amount is wrong
You already paid off the loan
You’re not the person who took out the loan
🔑 Taking action quickly is key. Your wages usually won’t be garnished until after the hearing is complete and a decision has been made.
What Happens if You Default on Private Student Loans?
The consequences of defaulting on a private student loan are similar to that of federal student loans.
❌ One difference is that a private lender or servicer can’t take your tax refunds or federal benefits to satisfy student loan debt.
Like federal loans, when you default on a private student loan, your loan is accelerated. This means that the entire amount of the loan becomes due immediately. The default will appear on your credit report and affect your credit score, which can hurt your future attempts to get credit.
If you default on your loan and the loan servicer’s collection efforts fail, your loan will be turned over to a private collection agency. The timeline for this will vary and depends on your private loan servicer. You may be sued if the collection agency can’t collect any portion of the debt.
Again, since this involves a private lender or servicer rather than the Department of Education, these timeframes may vary by the servicer. Because private student loan lenders don’t have as many options as federal lenders, they often use debt collection lawsuits as their main method to collect on defaulted loans.
🏛️ Unlike federal student loan lenders, parties trying to collect private student loans must file a lawsuit. They will be awarded a judgment if they win this lawsuit. As judgment-creditors, they can now garnish your wages or seize money from your bank account.
If you’re being sued over a private student loan, you’ll get a court summons. You may be able to fight the lawsuit or work out a settlement before the lender can garnish your wages.
Can You Get Your Student Loans Out of Default?
Yes. If you defaulted on your student loan, all hope is not lost! You may be able to do student loan rehabilitation or loan consolidation to get your loans out of default.
Loan rehabilitation offers some benefits that you can’t get with loan consolidation, but it takes months to complete. You can consolidate your loan in much less time. Let’s take a closer look at each option.
How To Get Your Student Loans Out of Default Using Student Loan Rehabilitation
Student loan rehabilitation is a way to get your student loans out of default status. It is a one-time opportunity. If you successfully rehabilitate your student loan, the default status will be removed, and you’ll also be eligible for deferment, forbearance, loan repayment plan options, and loan forgiveness. You’ll also be able to receive federal student aid again.
To start, contact your loan servicer and tell them you want to do a student loan rehabilitation plan. The servicer will probably ask you to provide documentation of your income because this will determine your monthly payment under the plan. For a Direct Loan Program loan (Direct Loan) or a Federal Family Education Loan (FFEL), your monthly payment is based on the 15% formula.
According to studentaid.gov, “The 15% formula means 15% of the amount by which your Adjusted Gross Income exceeds 150% of the poverty guideline amount that is applicable to your family size and state, divided by 12.”
How To Estimate Your Monthly Payment Under a Loan Rehabilitation Plan
You can estimate your monthly payment under loan rehabilitation before calling your lender. Let’s say your adjusted gross income is $50,000 and you have a family of four. For 2023, the federal poverty guideline is $30,000. First, we take $30,000 multiplied by 150% (or 1.5) and get $45,000. Then we subtract that number from your income. The difference between $50,000 and $45,000 is $5,000. Then we take 15% of $5,000, which is $750. Finally, to get your estimated monthly payment, divide $750 by 12, which is $62.50.
If you can’t afford the monthly payment calculated using discretionary income, you can ask the lender to calculate your payment based on the amount of monthly income you have left after paying (reasonable) monthly expenses.
Other Requirements for Student Loan Rehabilitation
To rehabilitate a defaulted Direct Loan or FFEL, you must agree in writing to make nine voluntary on-time payments (in the amount determined by your loan holder) within 20 days of the due date. And you must make all nine payments over 10 consecutive months.
The required student loan rehabilitation payments required for a federal Perkins loan will be determined by the lender or servicer. To rehabilitate a defaulted Perkins loan, you must make full monthly payments, within 20 days of the due date, for nine months straight.
If you rehabilitate your federal student loans, your credit report will still show the late payments your lender or loan servicer reported before the loan went into default, but the record of the default on the loan will be removed from your credit history.
How To Get Your Student Loans Out of Default Using Student Loan Consolidation
Loan consolidation is a way to get your student loans out of default status. A Direct Consolidation Loan allows you to pay off one or more student loans with a new loan that consolidates the previous loans. As with loan rehabilitation, after your loan is successfully consolidated, you’ll be eligible for deferment, forbearance, repayment plan options, and loan forgiveness. You’ll also be eligible to receive financial aid again.
To consolidate a federal student loan in default into a new Direct Consolidation Loan, you must agree to repay the new loan under an income-driven repayment plan or make three consecutive, voluntary, on-time monthly payments of a reasonable and affordable amount determined by the lender/loan servicer of the defaulted loan.
After Direct Loan Consolidation, nothing is removed from your credit report. Your credit history will continue to show the previous default status of the loan and the late payments that were reported before the loan went into default.
Let’s Summarize…
If your federal student loans go into default, the entire loan balance becomes due immediately. If this happens to you, there are two options to get out of default on a student loan: loan rehabilitation and loan consolidation. Both options give you access to loan benefits that are not available while in default, including eligibility for deferment, forbearance, choice of a repayment plan, loan forgiveness, and the ability for the borrower to receive future federal student aid.
If you’ve fallen behind on student loan payments or are about to, or if your loan is already in default, you can contact your loan servicer today to discuss your options.
