What Happens When You Default on Student Loans?

Student loan payments can feel like a heavy burden, especially if you’re struggling to keep up with other financial obligations. With the average monthly student loan payment hovering around $536, it’s easy to understand how some borrowers fall behind on their debt.^[1] But if you stop paying your student loan as agreed, the debt could eventually go into default—a situation with serious potential consequences, including wage garnishment and damaged credit.

For five years, debt collection on defaulted federal student loans was on pause thanks to pandemic-era financial relief measures. Yet as of May 2025, student loan collection efforts are officially back, making it even more important to understand what being in default means and how to avoid this financial misstep.^[2]

If you’re worried about how a student loan default could affect your credit or finances, you’re not alone. This guide walks through what defaulting on a student loan means, how it happens, the consequences you could face, and—most importantly—how to avoid default or get back on track if you’re already behind on payments.

What does it mean to default on a student loan?

Defaulting on a student loan means you’ve failed to make payments according to the terms of your loan agreement. The process starts the first day you miss a payment and don’t catch up. But with federal student loans, it takes a little time to officially reach default status. And even with private student loans, a single late payment doesn’t typically send your debt into default.

How long does it take for student loans to go into default?

Here’s how long it takes to default on a federal student loan if you stop making payments.

• Delinquency (1 day late): When you miss your due date by even one day, a lender may consider your federal student loan to be delinquent. Once your loan is delinquent, you may start to incur late fees.
• Severe delinquency (90 days late): After your federal student loan becomes 90 days past due, your loan servicer may report the account as late to the three major credit bureaus—Equifax, TransUnion, and Experian.^[3]
• Default (270 days late): If you don’t make a payment on your federal student loan for around nine months (270 days), the lender may place your debt into default. At that point, the debt may go to collections, and you could face several potential negative consequences covered below.^[4]

Private student loans follow different timelines than those above, and default often occurs after just 90 to 120 days of nonpayment. However, every situation is different. If you have a private student loan, be sure to review your promissory note for the specific terms of your repayment agreement.^[5]

What can happen if you default on student loans?

When a federal student loan goes into default, the government can take serious steps to try to collect the debt. As mentioned, collections for defaulted federal student loans will resume in May 2025 after a five-year pause. If your student loans are in default at that time (or moving forward), you risk facing the following consequences.

• Treasury Offset Program: This debt collection tool lets the federal government seize part or all of your tax refund and other government benefits (like Social Security, disability, etc.) to pay down your past-due balance.^[6]
• Wage garnishment: Your loan holder can instruct your employer to withhold up to 15% of your disposable pay directly from your paycheck and apply that money toward your defaulted federal student loan. Wage garnishment may continue until your loan is no longer in default or paid in full.^[7]

On a positive note, neither of these collections actions are instant. With the Treasury Offset Program, you should receive a notice (at your last-known address) to inform you that the offset is pending. From there, you’ll have 65 days to respond. Before wage garnishment begins, you’ll receive a notice at least 30 days in advance.^[8]

In both situations, these notices could give you some extra time. So, if you’re a borrower who has defaulted on your student loans, you may still be able to take corrective action before any withholdings begin. (See below for ways to get your student loan out of default.)

How defaulting on student loans affects your credit

Student loans have the potential to impact your credit—for the good or the bad—just like any other item on your credit report. Unfortunately, defaulting on student loans could hurt your credit in several ways.

• Late payments: Before your student loan reaches default status, a series of late payments will appear on your credit report. Because payment history is a significant credit score factor, late payments may cause severe credit score damage and could stay on your credit report for up to seven years.^[9]
• Default notation: If your federal student loan reaches default status, a negative notation may appear on your credit report indicating that the loan holder has filed a claim to collect the debt.
• Collection account: With private student loans, the lender might turn your account over to a collection agency if you default on your debt. In this scenario, a collection account could show up on your credit report, possibly causing additional credit score damage.^[10]

A student loan default doesn’t deduct a specific number of points from your credit score because that’s not the way credit scoring works. Instead, the credit score impacts can vary from one credit report to the next.

The overall damage that defaulting on student loans may cause depends on where your credit score started. People with a higher starting credit score may experience a bigger change.

For example, if you have good credit to begin with, the addition of several late payments and a student loan default to your credit report might trigger a significant credit score drop—potentially 100 points or more. Yet if you begin with bad credit or a fair credit score, any credit damage after a student loan default may not be as noticeable.^[11]

How to avoid student loan defaults

The consequences above can be scary. But the good news is you have options if you’re struggling to keep up with your student loan payments. Don’t wait until your loan defaults. There are several possible solutions that might help you.

Adjust your payment

If you’re currently signed up for a 10-year Standard Repayment Plan, an income-driven repayment (IDR) plan could help you lower your monthly payments—possibly to as low as $0.^[12] Other payment options might adjust your monthly payment and offer financial relief as well.

Below is a look at some repayment plans available.

• Graduated Repayment Plan: Your monthly payment begins at a lower amount and then increases over time, typically every two years. The plan makes sure you pay off your debt within 10 years (or within 10 to 30 years for Consolidation Loans).
• Extended Repayment Plan: Monthly payments may be fixed or graduated, and your repayment term is stretched out to 25 years.^[13]
• Income-Based Repayment (IBR) Plan: Your monthly payment amount is either 10% or 15% of your discretionary income (based on when you received your first loans), but not more than you pay under the 10-year Standard Repayment Plan. Any outstanding balance is forgiven after 20 or 25 years (also based on when you received your loans).
• Income-Contingent Repayment (ICR) Plan: Monthly payment amounts equal 20% of your discretionary income or the amount you would pay on a 12-year fixed payment plan (income-adjusted)—whichever is less. Any remaining balance is forgiven after 25 years.
• Pay As Your Earn (PAYE) Plan: Monthly payments are 10% of your discretionary income—never more than the amount you would pay under the Standard Repayment Plan.
• Saving on a Valuable Education (SAVE) Plan: Your payment is 10% of your discretionary income.^[14]

You can use the Education Department Loan Simulator tool to calculate and compare different repayment options.^[15] No matter which IDR plan you choose, it’s important to renew your paperwork every year. Recertification is necessary in order to remain in the plan and continue taking advantage of any payment reductions on your federal student loans.^[16]

Get a deferment

If an IDR is still too high for your current budget, you might want to consider talking to your student loan servicer to see if you’re eligible for a deferment. A deferment places a temporary pause on your student loan payments for specific situations like re-enrollment in school, active duty military service, or financial hardship.

If you have a subsidized loan, you also don’t have to pay interest during deferment. But for unsubsidized loans and some other federal student loans, interest will still accrue even while a deferment pauses payments.^[17]

Apply for forbearance

You can apply for federal student loan forbearance for up to 12 months at a time. (Keep making payments until your loan servicer approves you.) You may qualify for general forbearance due to financial hardship, medical expenses, changes in employment, or other reasons your loan servicer determines are acceptable. Plus, there are mandatory ways to qualify for forbearance as well. But keep in mind that if you’re eligible for forbearance, your student loan will continue to accrue interest and that balance will only grow while your payments are on pause.^[18]

Choosing a solution and options for private student loans

Keep in mind that the options above aren’t available once your federal student loan enters into default status. So, if you fall behind on your payments or suspect that you won’t be able to keep up with future student loan payments due to a job loss, illness, or other financial hardships, it’s important to give your student loan servicer a call as soon as possible.

Private student loan borrowers also don’t enjoy the same payment protections as federal borrowers. Still, some private student loan lenders may offer payment relief programs that give you the opportunity to catch up and stay out of default. It’s generally a good idea to reach out to your private lender if you’re facing financial struggles to see what options may be available. From there, you can evaluate any payment relief solutions to determine if they’ll work for you.^[19]

How to get your student loan out of default

If you’re already in default on your federal student loans, there are several potential solutions that could help you get back on track for the future. Here’s an overview of your options.

Loan rehabilitation

Depending on the situation, the loan rehabilitation process could be a great way to get your federal student loans out of default. Rehabilitation requirements may differ depending on your loan type. For defaulted Direct Loans and Federal Family Education Loans (FFEL), you’ll need to set up a payment plan and make nine payments on-time during a 10-month consecutive period. Payments under the loan rehabilitation program are also reasonable—equal to 10% or 15% of your annual discretionary income, divided by 12.

Not only can loan rehabilitation help you get out of default, it can give you access to federal student loan benefits again once you complete the process. After you complete the loan rehabilitation process you’ll once again be eligible for student loan benefits like deferment, forbearance, multiple repayment plans, and loan forgiveness. Plus, rehabilitation can help you have the record of the default removed from your credit history (though any late payments may remain).^[20]

Loan consolidation

Another way to get federal student loans out of default is to consolidate past-due debts into a new Direct Consolidation Loan. This approach lets you pay off one or more federal student loans with a new consolidation loan. However, with loan consolidation your lender will add any interest or collection costs you’ve accrued to the principal balance of your new loan and you could pay more money in the long run.^[21]

To qualify for a new Direct Consolidation Loan when you’re in default, you’ll need to take one of two actions.

• Agree to set up an income-driven repayment plan (IDR) on the new loan OR
• Make three consecutive, on-time payments on your defaulted student loan(s) prior to consolidation.

After you consolidate any defaulted federal student loans, you may once again be eligible for federal student loan benefits on your new Direct Consolidation Loan such as deferment, forbearance, loan forgiveness, and income-driven repayment (IDR) plans.^[20]

Student loan rehabilitation vs. consolidation

Both loan rehabilitation and consolidation offer several benefits when you’re considering ways to get your federal student loans out of default. At the same time, there are a few differences between these financial tools to consider before you decide which option might be the best solution for you.

Here’s a side-by-side look at some of the key features of both student loan rehabilitation and consolidation.

Source: Studentaid.gov^[20]

Bankruptcy

Another possible way to deal with defaulted student loan debt is by filing bankruptcy. Yet although bankruptcy can sometimes help consumers who need a fresh financial start, it’s not always a realistic solution for past-due student loan debt.

Student loans, especially federal student loans, often cannot be discharged in bankruptcy. Before most education loans can be discharged in bankruptcy, the Bankrutpcy Code requires that the borrower complete an “adversary proceeding” to prove that repaying the loan would cause a financial hardship. That process can be difficult.

However, some private student loans can be discharged just like other types of unsecured debt, like credit cards or personal loans. These loans may include:

• Loans that exceed what school actually costs (like tuition, books, or housing)—which may happen if a lender sends funds straight to the student rather than the school.
• Loans for programs at schools that are ineligible for federal student aid, including unaccredited colleges, foreign institutions, or certain trade programs.
• Loans taken out to cover costs while studying for professional exams, like the bar exam.
• Loans used during medical or dental residences to cover costs like fees, moving, or living expenses.
• Loans for students enrolled less than half-time in school.^[22]

Of course, even if it’s possible to discharge your student debt in a bankruptcy, you should consider the pros and cons of doing so. Bankruptcy can have long-term effects on your credit and finances. So, it’s wise to have a clear understanding of the process before moving forward.

Bottom line

Defaulting on your student loans can trigger long-lasting consequences, including wage garnishment, damaged credit, and a loss of payment relief benefits like deferment and forbearance. But default doesn’t have to be the end of your story, and it doesn’t need to define your financial future. With programs like income-based repayment, consolidation, and loan rehabilitation, it’s possible to recover from default—or perhaps avoid it in the first place.

The key to avoiding student loan default (or recovering after it happens) is to take action as soon as possible. Research your options and talk to your loan servicer or lender. By being proactive and staying informed, you’ll have a better chance of protecting your credit, reducing financial stress, and creating a more stable financial path forward.

Sources

1. EducationData.org. “Average Student Loan Payment.” https://educationdata.org/average-student-loan-payment
2. Ed.gov. “U.S. Department of Education to Begin Federal Student Loan Collections, Other Actions to Help Borrowers Get Back into Repayment.” https://www.ed.gov/about/news/press-release/us-department-of-education-begin-federal-student-loan-collections-other-actions-help-borrowers-get-back-repayment
3. StudentAid.gov. “Student Loan Delinquency and Default.” https://studentaid.gov/manage-loans/default
4. ConsumerFinance.gov. “What happens if I default on a federal student loan?” https://www.consumerfinance.gov/ask-cfpb/what-happens-if-i-default-on-a-federal-student-loan-en-663/
5. TateEsq.com. “Private Student Loan Default: Risks, Lawsuits & Your Options.” https://www.tateesq.com/learn/private-student-loans-defaulted
6. StudentAid.gov. “Treasury Offset.” https://studentaid.gov/help-center/answers/article/offset
7. StudentAid.gov. “What is wage garnishment?” https://studentaid.gov/help-center/answers/article/what-is-wage-garnishment
8. StudentAid.gov. “Collections on Defaulted Loans.” https://studentaid.gov/manage-loans/default/collections
9. Equifax.com. “Can You Remove Late Payments from Your Credit Reports?” https://www.equifax.com/personal/education/credit/report/articles/-/learn/remove-late-payments-credit-report/
10. Experian.com. “What Happens If You Default On a Student Loan?” https://www.experian.com/blogs/ask-experian/what-happens-if-you-default-on-student-loans/
11. myFICO.com. “How Credit Actions Impact FICO® Scores.” https://www.myfico.com/credit-education/faq/affects-of-credit-actions
12. ConsumerFinance.gov. “What if I’ve missed payments on my federal student loans or my payment is too high?” https://www.consumerfinance.gov/paying-for-college/repay-student-debt/federal-student-loans/#off-track
13. StudentAid.gov. “Federal Student Loan Repayment Plans.” https://studentaid.gov/manage-loans/repayment/plans
14. StudentAid.gov. “Income-Driven Repayment Plans.” https://studentaid.gov/manage-loans/repayment/plans/income-driven
15. StudentAid.gov. “Calculate Your Federal Student Loan Repayment Options with Loan Simulator.” https://studentaid.gov/loan-simulator/
16. StudentAid.gov. “Do I need to recertify my income-driven repayment (IDR) plan every year?” https://studentaid.gov/help-center/answers/article/recertify-my-idr-plan-every-year
17. StudentAid.gov. “Student Loan Deferment.” https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/deferment
18. StudentAid.gov. “Student Loan Forbearance.” https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/forbearance#eligibility
19. ConsumerFinance.gov. “Options for repaying your private education loan.” https://www.consumerfinance.gov/paying-for-college/repay-student-debt/private-student-loans/
20. StudentAid.gov. “Don’t get discouraged if you’re in default on your federal student loan.” https://studentaid.gov/manage-loans/default/get-out#loan-rehab
21. StudentAid.gov. “Consolidating Student Loans.” https://studentaid.gov/manage-loans/consolidation
22. ConsumerFinance.gov. “Busting myths about bankruptcy and private student loans.” https://www.consumerfinance.gov/about-us/blog/busting-myths-about-bankruptcy-and-private-student-loans/

About the author

Michelle Lambright Black is a nationally recognized credit expert with two decades of experience. She is the founder of CreditWriter.com, an online credit education resource and community that helps busy moms learn how to build good credit and a strong financial plan that they can leverage to their advantage. Michelle's work has been published thousands of times by FICO, Experian, Forbes, Bankrate, MarketWatch, Parents, U.S. News & World Report, and many other outlets. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

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