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A record number of federal student loan borrowers have fallen into default as pandemic-era protections fade and the Trump administration has moved away from Biden-era student loan forgiveness options.
According to an AP analysis, roughly 9.5 million borrowers are now in default, up from 5.3 million in June 2025, meaning nearly one in five federal student loan borrowers is at least nine months behind on payments.
Why It Matters
For many borrowers, default carries serious consequences, including damaged credit, wage garnishment, withheld tax refunds and potentially even reduced federal benefits later on.
However, there are still several options to get back on track and avoid the harshest collection measures, according to financial experts.
Linda Hilton, a 76-year-old retired office worker from Apache Junction, Arizona, went through garnishment before COVID and told the AP in 2025 that she will survive it again. But flights to see her children, occasional meals at a restaurant and other pleasures of retired life may disappear.
“It’s going to mean restrictions,” says Hilton. “There won’t be any travel. There won’t be any frills.”
What To Know
The surge in defaults followed the end of the COVID-era student loan payment pause, as well as the additional protections that had prevented delinquent borrowers from immediately facing the normal consequences of missed payments.
Borrowers began reentering default status in large numbers last year after years in which defaults were effectively frozen.
“The Trump administration’s goal was to simplify the student loan system by reducing the number of repayment options,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. “While that may sound appealing, for many borrowers it has come at a steep cost, with some seeing their monthly payments jump significantly.”
Today, around 9.5 million borrowers are in default, according to the AP. Many borrowers are also grappling with higher monthly bills, inflation and major changes to federal repayment programs under Trump’s Department of Education leaders.
A student loan typically enters default after a borrower fails to make payments for 270 days. Once that happens, collection activity can eventually include wage garnishment and Treasury offsets that seize tax refunds or certain federal payments.
“Most of those 9.5 million people think they can just start paying and be fixed. They can’t,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
“Default isn’t like being a month behind. Once you’re flagged as in default, simply resuming payments does not restore your good standing. It doesn’t matter if you call and make a payment tomorrow. The only way out is loan rehabilitation, consolidation, or a discharge program. Period.”
What Borrowers Can Do If They’re in Default
Fortunately, default does not have to be permanent.
According to Federal Student Aid, borrowers who are in default generally have three primary paths to move forward:
Loan Rehabilitation
One option is loan rehabilitation.
Under this process, borrowers agree to make a series of required payments calculated from their income. Successfully completing rehabilitation removes the loan from default status and can stop collections activity. Rehabilitation is generally available only once for a defaulted federal student loan.
Consolidation
Some borrowers may be able to leave default by consolidating their defaulted federal loans into a new Direct Consolidation Loan.
This option typically requires the borrower to either make repayment arrangements or agree to an income-driven repayment plan. Often, loan consolidation provides a faster exit from default than rehabilitation, depending on the borrower’s specific circumstances.
Repay the Loan in Full
Borrowers can also eliminate default by paying the entire outstanding balance, though this is often unrealistic for those already experiencing financial hardship.
You’re in Default. What Should You Do?
Can Borrowers Get Deferment or Forbearance?
Borrowers who have not yet entered default may also be eligible for deferment or forbearance, which temporarily pauses or reduces payments under qualifying circumstances. This can help you avoid default in the first place.
Federal Student Aid advises borrowers who are struggling but not yet in default to contact their loan servicer immediately to discuss options such as deferment, forbearance, lower monthly payments or even alternative repayment plans.
“Deferment doesn’t exist once you’re in default. That’s a tool to keep you out of default, not a way to reverse it,” Ryan said. “Once you hit default, you’ve lost access to deferment, forbearance, and forgiveness programs until you’re back in good standing.”
Borrowers who are already in default generally need to first resolve the default through rehabilitation or loan consolidation.
Income-Driven Repayment May Help
Experts say one of the most important steps struggling borrowers can take is exploring income-driven repayment plans.
These plans tie monthly payments to a borrower’s earnings rather than the loan balance, often resulting in substantially lower monthly bills for borrowers facing financial difficulties.
“I truly feel for these borrowers. Many were taken advantage of by schools that no longer exist, and now they’re left holding the bag. Add in servicing issues and constantly changing repayment rules, and it’s been a nightmare,” Thompson said.
“If RAP isn’t the best fit, borrowers should also explore ICR, PAYE, or IBR, which may offer lower monthly payments depending on their situation.”
What Steps Should Borrowers Take?
Borrowers falling behind should act now before their loans actually reach default.
Financial experts recommend the following steps:
- Log in to StudentAid.gov and verify loan status.
- Update contact information with loan servicers so important notices are not missed.
- Contact the servicer immediately if payments are unaffordable.
- Explore income-driven repayment options.
- Ask about rehabilitation or consolidation if already in default.
“It cannot be stressed enough how seriously individuals in these situations should approach getting out of default or delinquency,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
“Holding out in the false hope this debt will be forgiven will be financial poison for you in the long term, as it will destroy your credit score and any chance of future borrowing for other major life purchases.”
What Happens Next
The student loan landscape remains in flux as borrowers adjust to new repayment rules and the end of the SAVE plan.
Borrowers enrolled in SAVE are being directed to choose alternative repayment options. Struggling borrowers are urged to contact servicers before falling deeper into delinquency.
“If you’re delinquent right now, call your servicer today. Do not wait,” Ryan said. “Once you hit 270 days, you’re in default and the clock changes.”
Contact Newsweek editors on this story: Jason Lemon and Gray R. Thomas
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