In default and going back to school? Start here (2026)

If one of your federal student loans is in default, you can’t get a Pell Grant or a new federal loan until you fix it. The fastest fix for school: six consecutive, full, on-time, voluntary payments on the defaulted loan make you eligible for federal aid again, even though the loan is still in default. Source · FSA Handbook 2026-27, Vol. 1, Ch. 3

You are far from alone. About 9 million borrowers were in default on March 31, 2026, owing $220 billion, according to Federal Student Aid data reported by NASFAA. Source · NASFAA, June 25, 2026

Below are the three ways out, which one gets you into a classroom soonest, and the July 2026 rule that makes consolidation a bigger decision than it used to be.

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Default blocks Pell, new loans and more

A Direct or FFEL loan is in default after at least 270 days of missed payments. Default makes the whole balance due at once and ends your eligibility for federal aid, including Pell Grants and student loans. Source · StudentAid.gov, Delinquency and Default

It also follows you into the admissions office. A school can withhold your official transcript, though it must give you an unofficial one on request. The default is reported to credit bureaus, and you lose access to deferment, forbearance and your choice of repayment plan.

In January 2026 the Department of Education delayed wage garnishment and Treasury offset while it rolled out new repayment plans. It told defaulted borrowers to use the time to resolve their loans. Source · ED press release, Jan. 16, 2026 Check your own notices for the current status of collections on your account.

Six payments bring your aid back before the default is gone

The FSA Handbook, the rulebook financial aid offices follow, calls this a satisfactory repayment arrangement. Make six consecutive, full, voluntary payments on time and you regain eligibility for federal student aid. The loan holder updates your record, and the school can pay your aid once it has that proof.

Three conditions apply:

• Voluntary means paid by you. Money taken by wage garnishment or a seized tax refund doesn’t count.
• It works once. A borrower can regain eligibility this way only one time.
• Keep paying. Miss a payment after the six and the loan is back in active default, and your eligibility goes with it.

1. Month 1

   Sign a rehabilitation agreement and make the first payment
2. Month 5

   Five payments made: wage garnishment and offset can stop
3. Month 6

   Six payments made: eligible for federal aid again
4. Month 9 or 10

   Nine payments made: the loan is out of default

Rehabilitation removes the default from your credit report

To rehabilitate a defaulted Direct or FFEL loan, you agree in writing to nine monthly payments, each within 20 days of its due date, all within 10 consecutive months. Source · StudentAid.gov, Getting Out of Default

The payment is set by your loan holder at 10% or 15% of your discretionary income, depending on when you got your loans. Discretionary income is your adjusted gross income (AGI) minus 150% of the poverty guideline for your family size. If that is still too much, you can ask for a payment based on your income minus expenses. StudentAid.gov says it can be as low as $5.

Household	AGI	At 10%	At 15%
Single, no children	$30,000	$51	$76
Single, no children	$45,000	$176	$263
Single parent, two children	$45,000	$34	$50

Household Single, no children

AGI $30,000

At 10% $51

At 15% $76

Household Single, no children

AGI $45,000

At 10% $176

At 15% $263

Household Single parent, two children

AGI $45,000

At 10% $34

At 15% $50

These are planning figures from the 2026 guidelines. Your loan holder sets the real amount from your tax return and documents.

Once rehabilitated, the record of default comes off your credit history, though late payments reported before the default stay. Collections stop, and you get back deferment, forbearance, plan choice and forgiveness eligibility.

Until now, rehabilitation was a one-time chance. Starting July 1, 2027, each loan can be rehabilitated twice over its lifetime. Source · StudentAid.gov, Getting Out of Default

Consolidation is faster but sets your plan for good

Consolidating a defaulted loan into a new Direct Consolidation Loan gets you out of default as soon as the new loan is made. To qualify, you either agree to repay it on an income-driven plan, or make three on-time monthly payments on the defaulted loan first. Source · StudentAid.gov, Getting Out of Default

The July 2026 rules change what that costs:

• RAP is the only income-driven plan for a new consolidation loan. StudentAid.gov says this applies to consolidation loans made from July 1, 2026.
• It moves your other Direct Loans too. Any loan first paid out on or after July 1, 2026, a consolidation loan included, limits all your Direct Loans to RAP or the Tiered Standard Plan. Source · StudentAid.gov, OBBBA definitions
• The default stays on your credit report. Consolidation clears the default status, not its history.
• Garnishment blocks it. You can’t consolidate a loan under an active wage garnishment order or court judgment until it is lifted.

Six payments

Satisfactory arrangement

How long

Six months

Loan leaves default?

No, aid returns while it stays in default

Credit report

Default still shows

Repayment plans after

None until the default is resolved

Rehabilitation

Nine payments

How long

Nine to 10 months

Loan leaves default?

Yes

Credit report

Default record removed

Repayment plans after

The plans you qualified for before

Consolidation

New Direct Consolidation Loan

How long

Apply online now, or after three payments

Loan leaves default?

Yes

Credit report

Default record stays

Repayment plans after

RAP or Tiered Standard only (RAP forgives after 30 years)

Get back into school in five steps

1. Find who holds the defaulted loan

   Log in to StudentAid.gov and view your loan servicer details. Defaulted federal loans more than 360 days delinquent sit with the Default Resolution Group at myeddebt.ed.gov.

2. Ask for rehabilitation and a payment you can afford

   Start at StudentAid.gov/defaultsupport. If the first payment offered is too high, ask for the income-and-expenses calculation.

3. File the FAFSA now

   You can file while you make the payments. The aid office needs proof of the six payments before it pays aid, not before you apply.

4. Send proof to the aid office after payment six

   The school can use your updated loan record or a letter from the loan holder confirming the arrangement.

5. Finish all nine and set up auto pay

   Once the loan is out of default, enroll in auto pay. Direct Loans back in good standing can get the 1-point rate cut if you sign up by December 31, 2026. Source · ED press release, Sept. 29, 2026

Watch for anyone who charges you to get out of default. StudentAid.gov says your loan holder helps you for free, and to walk away from companies asking for enrollment or subscription fees.

Frequently asked questions

Can I file the FAFSA if my loans are in default?

Yes. The FAFSA flags the default, and your school can’t pay federal aid until the problem is resolved or you have made the six payments. Filing early means your aid is ready the moment you qualify.

Do garnished wages count toward the six payments?

No. Only payments you make yourself count. Payments taken through garnishment or Treasury offset don’t count toward the six or the nine.

Will rehabilitation fix my credit?

It removes the record of default from your credit history. Late payments reported before the loan defaulted remain on your report.

I rehabilitated a loan before and defaulted again. Now what?

Under the current rule, rehabilitation is one time per loan, so consolidation or repaying in full are your options today. From July 1, 2027, each loan can be rehabilitated twice.

Your next step: see what the six payments are worth

The payments are the cost of getting back in. The aid check shows the other side: your Pell estimate, state grant and loan limits for the school year you’re aiming for.