Millions of borrowers have defaulted on their federal student loans, and the government is preparing to take aggressive steps to collect on them in 2026.
The federal student loan system, which has been in upheaval due to lawsuits and legislation, remains in flux. At the end of 2023, the federal government ended a payment pause during the pandemic and resumed reporting late payments to credit bureaus a year later.
If you're having trouble making your monthly payments, there are steps you can take to stay current and avoid a default, which could result in payments being forcibly deducted from your paycheck or tax refund. Experts recommend considering affordable options now and taking action if necessary to avoid potentially serious consequences.
Here's what you should know.
How many borrowers are delinquent on student loans?
Nearly 10 million borrowers are in default, including about 3.4 million who were not officially enrolled in the federal defaulted loan program, financial aid expert Mark Kantrowitz said, according to his Sept. 30 analysis of federal loan data. That represents about a quarter of all federal student loan borrowers. About three million more borrowers have missed their payments but are not yet in default, Kantrowitz said.
Additionally, another seven million or so borrowers from the doomed SAVE plan will likely be forced to opt for a new plan and begin repayment sooner than many expected. Payments for SAVE borrowers have been paused for more than a year due to litigation, and borrowers may have difficulty getting back into the payments, said Abby Shafroth, executive director of advocacy at the National Consumer Law Center. “You will be in danger.”
The situation raises concerns about a wave of new defaults as borrowers also contend with high costs of living, an uncertain job market and health insurance turmoil. According to a recent survey of 1,010 federal borrowers conducted for the Institute for College Access and Success, an education research and advocacy group, nearly half of borrowers reported making compromises to meet both loan payments and basic needs.
“We're concerned that people won't be able to afford their payments,” said Michele Zampini, the institute's assistant vice president for federal policy and advocacy.
The Education Department said it encourages borrowers to check StudentAid.gov for online tools and repayment tips.
What happens if I can't afford my payments?
The government's offering of income-based plans, which make payments more affordable by tying them to a borrower's income, is changing and is set to shrink to a single, less generous alternative plan for new borrowers.
However, there are still several plans currently available that can reduce monthly costs compared to a standard 10-year payment plan. (In addition to income-based plans, other options are also available to current borrowers, including a “tiered” option that increases monthly payments over time.) However, about half of borrowers in the institute's survey said they had heard only “a little” about such plans, and 15 percent had heard “nothing at all.”
There are currently three plans available with different term lengths that take the borrower's income and family size into account when determining monthly payment amounts: income-driven repayment, known as IBR; Income-Contingent Repayment or ICR; and pay-as-you-earn or PAYE.
Credit experts recommend using a loan repayment simulator tool on the federal student aid website to check your eligibility (some types of loans don't work with certain plans) and see your expected payment. You can then apply online at StudentAid.gov for your preferred plan.
“The best case scenario is to find a plan you can afford,” Ms. Shafroth said.
If you're not sure what payment plan you're currently on, check online on your Federal Student Aid dashboard or with your loan servicer – the company that sends you statements and processes your payments.
The ICR and PAYE plans are due to be phased out by July 1, 2028. However, if one of these plans offers you a lower payment now, it may be worth signing up, even if you need to switch at some point, said Persis Yu, deputy executive director and managing counsel at Protect Borrowers, an advocacy group.
The IBR option remains available to people who have already taken out loans for college as long as they do not take out new loans after July 1, 2026. Previously, borrowers had to demonstrate “partial financial hardship” to enroll in IBR, but that requirement was eliminated as part of last summer’s federal budget legislation. According to a Dec. 22 update to the Federal Student Aid website, the loan simulator now reflects the change.
A new income-based plan, the Repaid Assistance Program (RAP), is scheduled to take effect next July; Ultimately, it should be the only alternative for new student loans. From July there will also be changes to the standard repayment plan for new loans.
How quickly can I switch to an income-driven plan?
The Education Department says switching plans is “quick and easy” if borrowers agree to allow the department to obtain their tax data directly from the Internal Revenue Service. Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group, said a backlog of applications had largely been cleared and that 90 percent were now being processed within two days.
What happens if I can't afford my payments, even with a special rate?
Loan experts say there are still options available to deal with temporary financial or medical setbacks, such as a forbearance or deferment. Both options allow you to suspend payments for a specific period of time. But there are disadvantages. In most cases, interest will still accrue. (In the case of a deferment, no interest accrues on cheaper subsidized loans.)
And if you're pursuing a loan forgiveness program in which your debt can be forgiven after making a required number of payments — typically for 20 or 25 years, depending on the plan — a stay can extend the time until forgiveness.
To apply, contact your loan servicer. In some cases, you may be required to provide documentation such as medical bills or proof of unemployment benefits.
If you're stressed about credit card bills, a reputable nonprofit credit counseling program may be able to help you manage your other debts and optimize your budget so you can pay off your student loans. You can search online at the National Foundation for Credit Counseling.
What if I just stop paying my loans?
“If you ignore your payments, you're going to get into more financial trouble,” said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, which offers free credit counseling. “You’re going to be in real trouble if you default on it,” she said.
If you default, your loan balance will become due in full. And your credit score will be seriously affected.
To get out of default, you must either agree to rehab your credit, which usually involves making a series of affordable payments over a period of time, or to consolidate your debt into a new loan. Rehabilitating is generally preferable, Mr. Buchanan said, because delinquency records are removed from your credit history (although late payment records remain).
To discuss your options, contact your loan servicer. If you are in the late stages of default, you may be referred to Maximus Federal Services, which manages the government's default resolution program.
If you do nothing, the debt won't go away. The federal government has reopened its debt collection program, allowing it to take money directly from your paycheck (called garnishment) to pay off your debts. The Trump administration said in December that it had told about 1,000 borrowers that it would begin garnishing wages in early 2026 and expects to issue more warnings over time.
“Many people don't realize that the standard machinery has been turned back on,” Ms. Yu said.
The government is also expected to collect income tax refunds in 2026 to help repay defaulted loans. Many families rely on their refunds, Ms. Yu said, including those from the low-income earned income tax credit, to pay for costs such as medical bills and car repairs. “It will be a big shock,” she said.
What if I'm on the SAVE repayment plan?
SAVE, the lowest-cost alternative repayment plan, was already scheduled to be discontinued and may now be discontinued soon due to a settlement between the Department of Education and the state of Missouri, which sued to terminate the plan. The settlement, announced Dec. 9, is awaiting approval from a judge. Under the proposed terms, no new borrowers will be able to enroll, all pending applications will be rejected, and participants will have to move to new repayment plans. The timeline for the changes is not clear; The department has given varying estimates about when it will contact borrowers.
SAVE borrowers who are seeking loan forgiveness through an income-driven repayment plan and have made 25 years (300 months) of qualifying payments should consider switching to IBR or ICR because they are now eligible to cancel their loans in those plans, the National Consumer Law Center advised. Visit the Center's website for more details on the impact of the settlement.