Your options
| Rehabilitation | Consolidation | Repayment agreement | Pay in full | |
|---|---|---|---|---|
| What you do | 9 on-time payments within 10 months | Apply for a Direct Consolidation Loan | Agree to a payment plan with DRG | Pay the balance |
| Speed | Several months | Faster online application | Several months | Immediate |
| Credit record of default | Removed after the 9th payment | Can stay up to 10 years | Stays | — |
| Collection costs | Avoided | Added to the debt, with capitalized interest | Avoided | — |
Source: StudentAid.gov’s default FAQ.
Rehabilitation
You make 9 voluntary payments within 20 days of their due dates during 10 consecutive months. The amount must be “reasonable and affordable”; the Department starts from the payment you would owe on an income-driven plan, with a minimum of $5 a month, rising to $10 from July 1, 2027 (34 CFR 685.211). You can object to the amount and ask for it to be recalculated from your actual income and expenses.
The 2025 law lets you rehabilitate a loan twice instead of once, starting July 1, 2027. The Department’s Jan. 16, 2026 delay of collections was meant in part to give borrowers time to use that second chance.
Consolidation
Consolidating a defaulted loan into a new Direct Consolidation Loan takes it out of default. First you make three consecutive on-time monthly payments, or agree to repay the new loan on an income-driven plan; collection costs of up to 18.5% can be added (consolidation rules). A consolidation loan made on or after July 1, 2026 can only be repaid under RAP or Tiered Standard (or only Tiered Standard if it repaid a parent PLUS loan).
Garnishment and offset deadlines
- Wage garnishment: a first payment under a repayment agreement within 30 days of the notice avoids it; a hearing request postmarked within 30 days pauses it.
- Treasury offset: a first payment within 65 days of the notice avoids it.
Contact: DRG at 1-800-621-3115, or MyEdDebt.ed.gov.
Not financial or legal advice. This page explains the published rules. It does not tell you which plan to choose. Your loan servicer and StudentAid.gov have the final word on your account.
Official sources
- 34 CFR 685.211, payment application, prepayment and loan rehabilitation (current eCFR)
- StudentAid.gov: Student Loan Default and Collections: FAQs
- U.S. Department of Education press release, Jan. 16, 2026: involuntary collections delayed
- Public Law 119-21 (H.R. 1, signed July 4, 2025), Title VIII, Secs. 81001–82004
Last verified Oct 17, 2026. Corrections are logged on What changed.
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