There’s been a lot of chaos surrounding federal student loans for the past 5+ years. Some (but not all) federal student loans were put on pause early in the pandemic, then other types of loans were added, then the pause was extended…and extended again.
In the fall of 2023, the pause ended. Student loan payments once again became due, and interest started accruing again. But, collection activity didn’t resume. In April of 2025, the Department of Education (DOE) announced that about 5 million student loan borrowers were in default, and another 4 million in late-stage delinquency. These two categories made up more than 20% of all student loan borrowers with outstanding debt. The DOE also announced that involuntary collection of delinquent student loan debt would resume.
As of April of 2026, that hasn’t happened, in large part due to further chaos created by the current administration’s revocation of some of the most popular repayment plans, leaving many borrowers without a plan, and with much worse options than they had before. Involuntary collection is on the horizon, but we don’t yet know exactly when it will restart.
If you’re one of the 9 million borrowers whose account is delinquent or in default, it’s important to know what to expect and what options you may have.
Defaulting On Your Loans
First, let’s talk about what it means to default on a loan. The day you miss a payment, your loan is considered to be “delinquent.” In other words, it’s not in good standing. Until you catch up on all your payments, your loan will stay delinquent. If you just forgot a payment or are a couple of weeks late in paying, that’s not a serious crisis. You may be charged a late fee and accrue a bit of extra interest, but you won’t face collection action or see that late payment on your credit report. In fact, federal student loan debt typically isn’t reported as delinquent until you’re 90 days past due. You want to avoid that if at all possible, because the delinquency can impact your credit score and ability to rent an apartment, finance a vehicle, or obtain other credit.
If your loan stays delinquent for long enough, you’re considered to be in default. If your loan requires monthly payments, you’re typically considered in default after 270 days. If you have an FFEL loan and are not on a monthly payment schedule, you may have a bit longer. Remember that a partial payment doesn’t count as a payment for default purposes, so the clock starts as soon as you fall behind and continues even if you make partial payments. To stop the clock, you need to catch up on all your back payments.
The Default Process
If you default on a regular, non-student loan, you’ll typically start receiving letters from your bank about repayment. They’ll report it to the credit agencies, but they usually can’t do anything to collect without filing a collection lawsuit against you. They may sell the loan to a debt buyer, or pass it to a collection agency or law firm to collect on their behalf. If they file a lawsuit and win, then they can ask the court to garnish your wages, levy your bank accounts, and use other methods to collect the debt.
Federal student loans have similar collection options, but with one big difference: the government doesn’t have to file a lawsuit in order to collect. For student loan repayment, the feds can take up to 15% of your disposable income (your wages after taxes and Social Security withholding). They can also withhold your tax refund and federal benefits. There are some limits, which may vary by benefit type. They can’t take more than 15% of your federal benefits and they can’t leave you with less than $750 per month in Social Security benefits. Some types of benefits, such as SSI, are not subject to garnishment for student loan debt. Note that some of these collection actions can be challenged in court, but you’re going to need an experienced (and potentially expensive) attorney to help you.
Other Default Consequences
Defaulting on your loan isn’t just a threat to your wages and tax refund. It can also cause you a lot of other problems. The default will be reported to the credit bureaus and will damage your credit score. You’ll lose your eligibility for other student aid and you’ll no longer qualify for deferment or forbearance. That can make getting your loan back on track really tricky. You’ll also be incurring late fees and growing interest that can make curing your default even trickier.
Finally, defaulting on a student loan can affect other people. If you’re married and file a joint tax return, your spouse’s portion of your federal tax refund may be intercepted to pay the debt. They may be able to prevent this or get their portion of the refund back, but will have to file paperwork to do so. In addition, anyone who co-signed or guaranteed your student loans is on the hook for repayment and may face the same kinds of collection efforts as you, like wage garnishment, tax refund interception, withholding of benefits. While most federal student loan borrowers don’t need co-signers, this may impact parent borrowers and those who borrowed for graduate school.
Behind On Your Loans?
If you’re struggling to keep up with your student loan payments, doing nothing is the worst possible option. Federal student loans mean automatic collection efforts if you go into default, and it can be difficult to turn the tide and get back on track.
The good news is that there are a number of ways to make repayment of your student loan debt easier. Federal student loan borrowers can participate in a number of repayment programs. However, those payment plans are in flux at the moment, and are less favorable than many student loan borrowers have become accustomed to.
If you can’t make a payment because of short-term extenuating circumstances (like an illness or a natural disaster), your lender may give you a deferment or a forbearance. Each will allow you to skip a specified number of payments. The biggest difference between the two is that student loans do not accrue interest during deferment, but they do during forbearance. Therefore, deferment is typically preferable if you have the option.
In 2026, You May Be Able to Discharge Your Student Loans in Bankruptcy
For many years, student loan borrowers consulting bankruptcy attorneys were met with bad news: it was nearly impossible to discharge student loan debt in bankruptcy. That left many borrowers with crippling debt they had no hope of ever paying off and few solutions.
Fortunately, new guidance issued to the Department of Justice (DOJ) under the Biden administration changed the way DOJ attorneys assess undue hardship for the purpose of determining whether student loan debt should be discharged. As a result of that guidance, many student loan borrowers have been able to successfully discharge some or all of their student loan debt in the past few years.
However, it’s important to note that this is not a change in the law. It’s simply guidance to government attorneys that could be revoked at any time. So, if you want to learn more about your options for discharging student loan debt, you should contact an experienced Los Angeles bankruptcy attorney as soon as possible, while the option is still available.
The Bottom Line
Default is no joke. It has serious consequences and can cause you serious pain down the line. Letting your student loan account fall further behind just limits your options and makes it more difficult to get back on track. Whether you’re looking for repayment options to make your loan manageable or want to explore trying to discharge your loan in bankruptcy, don’t delay.
You can schedule a free consultation with an experienced Los Angeles bankruptcy attorney at Borowitz & Clark right now. Just fill out the form on this page or call 877-439-9717.