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 consolidation is one way to get your student loan out of default. If you consolidate your defaulted loans into a new Direct Consolidation Loan, your loan will be removed from default, all collections will stop, and you will be able to access affordable loan repayment options through the income-driven repayment (IDR) program.
There are downsides to consolidating your loans, and it may not be the best option for you to get your loans out of default. For more information on loan consolidation, see the Department of Education’s website and view our page on consolidating loans to understand the pros and cons of consolidation.
Am I Eligible to Get My Loans Out of Default Through Consolidation?
Most federal student loans are eligible for consolidation. A borrower may consolidate one or more federal student loans to get out of default through consolidation. Although prior rules required the borrower to have at least one outstanding FFEL Program loan or Direct Loan in order to obtain a Direct Consolidation Loan, new regulations that went into effect on July 1, 2017, eliminated this requirement. This means a Perkins Loan can now be consolidated into a Direct Loan without any other federal loans.
How Do I Apply for Loan Consolidation to Get Out of Default?
You have to submit an application to apply for a consolidation by paper or online. In your application to consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you have to:
- agree to repay the new Direct Consolidation Loan under an IDR plan, or
- make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.
Contact your loan servicer to get more information about consolidating your defaulted student loans to get out of default. You can apply to consolidate your loans online through the Department of Education’s website.
What Happens After My Loans Are Consolidated?
After your loans are consolidated, your loan will be removed from default, and collections (such as wage garnishment and tax refund offset) will stop. You will then 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.
If you consolidated your loans by agreeing to sign up for an IDR plan, your payment will be based on the IDR plan you signed up for. If you consolidated by making three full payments, you can sign up for whatever repayment plan you are eligible for, including IDR plans. 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.
