:max_bytes(150000):strip_icc()/GettyImages-1325860540-d2ba6c2363324e0197de296283249959.jpg "2 Ways To Get Out of Student Loan Default Before Your Wages Get Garnished")
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KEY TAKEAWAYS
- Millions of federal student loan borrowers are in default, and in February, thousands will begin to see their wages garnished by the Department of Education to offset any outstanding payments.
- Borrowers can consolidate their student loans or apply for loan rehabilitation, which will help them exit default and restore their loans to good standing.
The Department of Education will soon resume garnishing the wages of defaulted borrowers, and experts say these borrowers should take action now to get back into good standing.
More than 5 million borrowers who are currently in default, which occurs after 270 days of missed payment, could have their wages garnished starting in February if they can’t get back into good standing.
In 2025, the Department of Education began withholding tax refunds from defaulted borrowers, and this week, the department announced that defaulted borrowers will be notified starting Jan. 7 that their personal wages will soon be garnished. After borrowers receive a notice that their wages are set to be garnished, they have 30 days to rectify their situation before their wages are cut.
Why This Matters
Once the Department of Education cuts a defaulted borrower’s income, it becomes even more challenging for them to resume payments, and it negatively impacts their credit, making other debt more expensive to take on as well.
Experts say there are two main ways for borrowers with defaulted loans to get into good standing and avoid wage garnishments.
“[Borrowers should] start educating themselves about consolidation and rehabilitation, and consider reaching out now, rather than wait for communication,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, earlier this year when the garnishments were first announced. “You can get started on those processes now. If they log into studentaid.gov, they can see who they need to contact to get the process rolling.”
Both loan consolidation and rehabilitation can only be done once, so borrowers need to understand which option is best for their circumstances before starting the process.
Loan Consolidation
One way to get a loan out of default is to apply for student loan consolidation. This process pays off multiple student loans to combine them into a single loan, bringing the borrower out of default.
A borrower must sign up for an income-driven repayment plan or make three consecutive, voluntary, on-time full monthly payments on the defaulted loan to consolidate.
However, the accrued interest is added to the balance once a loan is consolidated. Additionally, while a borrower is brought out of default, the record of the default and the late payments before it will still remain on their credit report.
Loan Rehabilitation
Loan rehabilitation can take longer than consolidation, but it takes the defaulted loan off a borrower’s credit report and does not add accrued interest to the balance.
To rehabilitate a loan and get back into good standing, a borrower must agree to and make nine voluntary, reasonable, and affordable monthly payments over ten consecutive months, as determined by their loan servicer.
