Collections Have Restarted
On May 5, 2025, the federal government restarted collections on federal student loans that are in default. That means if you haven’t made a payment on your federal student loans in more than 270 days, you could soon face serious consequences, including losing your tax refunds, a portion of your wages, and even some of your Social Security benefits. Unlike other types of debt collection, the government can take these steps without going to court. There is no statute of limitations on collecting federal student loan debts. This means you could face collection actions for debts that are years old.
Take steps now to make sure your loans aren’t in default! If you are in default, act quickly to get out of default and avoid collections.
Loan rehabilitation is one way to get your student loan out of default. Under a loan rehabilitation agreement, you make nine consecutive payments that are based on your income to your loan holder (for Perkins Loans, you have to make the full standard payment). For more information on loan rehabilitation, see the Department of Education’s website.
How Do I Apply for Loan Rehabilitation to Get Out of Default?
To start the loan rehabilitation process, contact your loan holder or loan servicer.
What Happens After My Loans are Rehabilitated?
After you make your last payment under your loan rehabilitation agreement, your loan will be removed from default; collections, such as wage garnishment and tax refund offset, will stop; and you will be placed back into repayment. Your loans may also be transferred to a new loan servicer.
You will get a notice from your loan servicer about returning to repayment after you get out of default. You will have to continue to make monthly payments on your loans to avoid defaulting again, so pay close attention to any notices your loan holder or servicer sends you about your new payment amount and due date.
It’s likely that your loan servicer will put you into a standard repayment plan after your loan gets out of default, but you may be eligible for a lower payment through an income-driven repayment (IDR) plan. Under an IDR plan, your payments are based on your income and family size and could be as low as $0 per month. You should ask your loan holder or servicer about your loan repayment options, including IDR plans, before your repayments start.
Can I Complete a Loan Rehabilitation More Than Once?
Generally, no. If you rehabilitate a defaulted loan and then default again, you can’t rehabilitate a second time. Rehabilitation is a one-time opportunity. However, this one-time rehabilitation rule does not apply to borrowers who completed a rehabilitation agreement during the pandemic payment pause or borrowers who used Fresh Start to get out of default. Also, because of changes in the law as a result of the Big Bill, beginning July 1, 2027, you will be able to complete a loan rehabilitation twice to get out of default.
