Default and Wage Garnishment: How to Get Out
If your federal student loans are in default, the government can take part of your paycheck, your tax refund and some federal benefits without suing you. Those tools were paused in January 2026, but reports in late October say collections may restart soon. Here's where things stand, what rights you have, and how to get out of default for good.
- Status (as of November 2026): ED paused wage garnishment and Treasury offset for its loans in January 2026 and hasn't announced a restart date. Reports in late October 2026 say Treasury may bring on private collectors as soon as November. ED has denied those reports.
- Fresh Start is over. It ended September 30, 2024.
- Rehabilitation: nine on-time, income-based payments in 10 months removes the default and the default notation on your credit report. One use per loan for now; a second chance arrives July 1, 2027.
- Consolidation: faster, but the new loan is limited to RAP or Tiered Standard (Parent PLUS: Tiered Standard only), and it makes all your Direct Loans “new borrower” loans.
- Any notice you receive comes with a deadline. Respond in writing before it passes.
Where collections stand right now
- January 2026: ED announced a “temporary delay” of involuntary collections, both administrative wage garnishment and the Treasury Offset Program, to implement the 2025 law's repayment changes. It gave no end date.
- 2026: ED signed an agreement for the Treasury Department to handle collection of its defaulted loans.
- Late October 2026: news reports said Treasury may bring on private collection agencies as soon as November. An ED spokesperson denied the rumors, and as of October 30 no contract had been reported as awarded.
- Not covered by the pause: older FFEL loans held by guaranty agencies. Those agencies can still garnish wages.
Use the pause. Getting out of default takes months, and it's much easier before garnishment starts than after.
Your rights when collection notices arrive
| Collection tool | How much | Notice before it starts |
|---|---|---|
| Administrative wage garnishment | Up to 15% of disposable pay, no court order needed | 30 days to respond. You can request a hearing. |
| Treasury offset (tax refunds) | Your federal tax refund | 65 days in the initial notice |
| Social Security offset | Up to 15% of benefits, but your benefit can't be cut below $750 a month | 30 days. SSI and VA benefits shouldn't be offset. |
Notices go to your last known address, so update your address with your servicer and on StudentAid.gov now. When you get a notice:
- Read the deadline and mark it. The objection form has to be in by that date.
- Object if you have grounds: you don't owe the debt, the amount is wrong, you're already in a repayment or rehabilitation agreement, you're in bankruptcy, or you're totally and permanently disabled.
- Ask for a hardship hearing if garnishment would cause extreme financial hardship. Hearings can be held by phone or on written records. Decisions typically take about 60 days. A win can stop or reduce garnishment for 12 months.
- Start a way out of default at the same time (below). Objecting buys time; it doesn't fix the default.
The three ways out of default
| Rehabilitation | Consolidation | Pay in full or settle | |
|---|---|---|---|
| How long | About 9–10 months | Often weeks | Immediate |
| Payment | Income-based; can be as low as $5 a month (rising to $10 for Direct Loans on July 1, 2027) | New loan on RAP or Tiered Standard | Lump sum |
| Removes default notation from credit report | Yes | No (default history stays) | No |
| Keeps your original loans | Yes | No, creates a new loan | — |
| Stops active garnishment | After the 5th payment | Not available while a garnishment order is active | Yes |
| How often | Once per loan now; twice from July 1, 2027 | Check with your loan holder | — |
Rehabilitation
You agree to a monthly payment, and you make nine voluntary, on-time payments within 10 consecutive months. Each one must arrive within 20 days of its due date. Garnished wages and seized refunds don't count toward the nine.
- Payment amount: for Direct Loans it's based on an income-driven calculation. If it's unaffordable, you can ask to have it recalculated from an income-and-expense form.
- Garnishment: if it's already running, it continues through your first four payments and stops after the fifth.
- Afterward: the loan returns to good standing with a servicer, the default notation is removed from your credit report (late payments reported before the default stay until they age off), and you can choose a repayment plan. Because no new loan is made, rehabilitation by itself doesn't turn you into a “new borrower.”
- Second chance: the 2025 law (OBBBA) allows a loan to be rehabilitated twice, but that change takes effect July 1, 2027. Until then, a loan that was already rehabilitated once can't be rehabilitated again.
Consolidation
You take out a new Direct Consolidation Loan that pays off the defaulted loans. To consolidate out of default, you generally either make three consecutive, voluntary, on-time monthly payments first, or agree to repay the new loan on an income-driven plan. It's fast, but in 2026 it has serious costs:
- A consolidation loan made on or after July 1, 2026 can use only RAP or Tiered Standard, and it makes all of your Direct Loans “new borrower” loans, ending IBR access on your other loans. See the consolidation cliff.
- A Parent PLUS consolidation made now gets Tiered Standard only, with no income-driven plan at all. See Parent PLUS after 2026.
- Consolidation can also change your PSLF payment count. Check with our consolidation decision tool first.
- If a garnishment order is already active, you generally can't consolidate until it's lifted.
Other exits worth checking first
- Discharge: if you're disabled, your school closed, or your school misled you, you may not owe the debt at all. See TPD discharge and closed school and borrower defense. A pending TPD application can pause collection.
- Bankruptcy: student loans can be discharged only by showing “undue hardship” in a separate court proceeding. A 2022 Justice Department and ED process made that more achievable. Filing also triggers an automatic stay that halts garnishment while the case is open. Talk to a bankruptcy attorney or legal aid.
Fresh Start has ended
Fresh Start, the one-time program that let defaulted borrowers return to good standing with a simple request, closed on September 30, 2024. Anyone offering to enroll you in “Fresh Start” today is either out of date or running a scam. The real routes now are the ones above.
Contact the Default Resolution Group at 1-800-621-3115 for ED-held defaulted loans. If your loan is held by a guaranty agency, the agency's contact information is on StudentAid.gov under your loan details.
Default is when “debt relief” companies hit hardest, often promising to stop garnishment for a monthly fee. Every federal application, from IDR and consolidation to PSLF, discharges and default resolution, is free at StudentAid.gov or through your servicer. Anyone who charges a fee, asks for your FSA ID password, or promises guaranteed forgiveness is a red flag. See how to spot student loan scams.
What to do this week
- Log in to StudentAid.gov to see which loans are in default and who holds them (ED's Default Resolution Group or a guaranty agency).
- Update your mailing address and email with your servicer and on StudentAid.gov, so you get every notice.
- Call the Default Resolution Group (1-800-621-3115) and ask for a rehabilitation payment quote based on your income.
- If you might qualify for a disability, closed school or borrower defense discharge, apply now. It can be a better exit than repaying.
- If you receive a garnishment or offset notice, write the deadline down and file any objection before it.
FAQ
Is student loan wage garnishment happening right now?
For ED-held loans, wage garnishment and Treasury offset have been paused since January 2026, and as of November 2026 ED hadn't announced a restart date. Reports in late October 2026 said collections could restart soon. Guaranty agencies holding FFEL loans weren't covered by the pause.
Is the Fresh Start program still available?
No. Fresh Start ended September 30, 2024.
How many times can I rehabilitate a student loan?
Currently once per loan. The One Big Beautiful Bill Act allows a second rehabilitation starting July 1, 2027.
Should I rehabilitate or consolidate?
Rehabilitation takes about 9–10 months but removes the default notation from your credit report and keeps your original loans. Consolidation is faster, but a consolidation made now can use only RAP or Tiered Standard (Tiered Standard only for Parent PLUS) and ends IBR access on your other Direct Loans.
How much can be garnished from my paycheck?
Administrative wage garnishment can take up to 15% of disposable pay. You get a notice with 30 days to respond and can request a hearing if it would cause extreme financial hardship.
Sources
Checked October 31, 2026. Rules are changing quickly; when an official notice and this page disagree, the official notice wins.
- U.S. Department of Education: ED delays involuntary collections (Jan. 2026)
- Forbes: Education Department is about to seize borrowers' wages and benefits (Oct. 19, 2026)
- Forbes: Borrowers can stop ED from taking their wages (Oct. 26, 2026)
- Tate Law: How to stop student loan wage garnishment (updated Oct. 30, 2026)
- Tate Law: Student loan rehabilitation, the 9-payment rule (updated Oct. 28, 2026)
- Orrick: ED finalizes overhaul of loan limits and repayment plans (rehabilitation effective dates)
- Student Loan Borrower Assistance (NCLC): Fresh Start ends Sept. 30