In Default on Student Loans? A New Online Support Center Lets You Apply to Fix It Without Paper Forms

Millions of borrowers are behind on federal student loans. A new tool aims to make getting out of default faster.

On Wednesday, September 30, the U.S. Department of Education and the U.S. Department of the Treasury launched a new online tool called the Defaulted Loans Support Center. It lives on StudentAid.gov, the official federal student aid website.

The goal is to replace a slow, paper-heavy process. Before, many borrowers had to make phone calls, send faxes and mail forms to get out of default. Now borrowers can apply online, upload documents and track their progress in one place.

How big the default problem is

A Direct federal student loan goes into default after at least 270 days, about nine months, without a scheduled payment. Default is serious, and it has become very common.

According to Forbes, about 9.3 million borrowers were in default as of June 2026, holding roughly $234 billion in defaulted federal loans. The Treasury Department said more than 5 million borrowers have been in default for over six years.

Treasury Secretary Scott Bessent called the new center "an important early achievement" of a partnership between Treasury and the Education Department. Education Secretary Linda McMahon described it as "a historic step toward breaking up the federal education bureaucracy while streamlining critical resources for student loan borrowers in default."

What you can do in the new support center

Borrowers can log in with their regular StudentAid.gov account. In the support center, you can:

• Learn what default means and what it can cost you
• Compare your two main ways out of default: rehabilitation and consolidation
• Apply online for either option and upload the documents you need
• See estimated payment amounts and track where your application stands

Borrowers who consolidate out of default and then sign up for automatic payments can also get a temporary 1% interest rate reduction, according to the Treasury Department.

Rehabilitation vs. consolidation, explained

There are two main paths out of default. Here is how they differ.

Loan rehabilitation. You agree to a new monthly payment and make nine on-time payments within 10 consecutive months. Under a standard agreement, the payment equals 15% of your discretionary income (roughly, income above a set amount tied to the poverty line), divided by 12. If you can't afford that, you can ask for a payment based on your budget. When you finish, the default status is removed, collections stop and the record of the default comes off your credit reports.

Consolidation. You combine your defaulted loans into a new Direct Consolidation Loan. This can be faster, but the record of the default stays on your credit report.

The Treasury Department said approved rehabilitation applications have risen 69% since the partnership began.

What this means for your wallet

Default can take money straight out of your pocket. According to Federal Student Aid, the government can garnish (take part of) up to 15% of your paycheck, keep your tax refund or certain federal benefits to repay the debt, and add collection costs to what you owe. Default is also reported to the credit bureaus, which can hurt your credit.

If you have federal student loans, consider these steps:

• Check your status today. Log in to StudentAid.gov to see whether any of your loans are in default or close to it.
• Act early if you are behind. If you have missed payments but are not yet in default, contact your loan servicer about options such as an income-driven repayment plan.
• Compare both exits from default. Rehabilitation takes longer but can help your credit more. Consolidation can be quicker. Pick the one that fits your goals.
• Use only official websites. Getting out of default is free through StudentAid.gov. Be careful of companies that charge fees for help you can get at no cost.