Navigating Student Loan Collections After Forbearance: A Comprehensive Guide

The landscape of federal student loans has been subject to significant shifts, marked by periods of repayment, collections, and even forgiveness initiatives. These changes, often implemented in fits and starts, have created uncertainty for borrowers. This article aims to provide a comprehensive overview of the current state of student loan collections, particularly in the wake of recent forbearances and pauses.

Understanding Default and Its Consequences

Defaulting on a federal student loan carries serious legal and financial repercussions. A loan is considered in default when scheduled payments haven't been made for at least 270 days. Upon default, the Department of Education’s (ED) Default Resolution Group (DRG) takes over, notifying borrowers of the steps needed to get back on track. Failure to address the default can lead to the government withholding money to recover the debt, a process initiated after a written notice is sent to the borrower.

Consequences of Default

Staying in default can trigger involuntary collections, such as wage garnishment and Treasury offset, which continue until the debt is fully paid or the default is resolved. Default status is also reported to major credit reporting agencies (Equifax, Experian, Innovis, and TransUnion) 65 days after the loan is placed in default, further damaging credit scores.

Getting Out of Default: Loan Rehabilitation

Loan rehabilitation offers a path to bring federal student loans out of default. This involves making a specific number of consecutive, on-time payments to ED or the guaranty agency (for FFEL borrowers) under a rehabilitation agreement.

Steps to Initiate Loan Rehabilitation

Contact the Default Resolution Group (DRG): If your loan is managed by the DRG, create an account on MyEdDebt.ed.gov using your Social Security number. Note that your StudentAid.gov credentials will not work on this site.
Access Your Account Information: The "My Account" page displays contact information, status messages, and details regarding the Fresh Start program (which ended on Oct.
Understand Your Debt ID and Servicer: Your "Debt ID" is a unique identifier for your loan, and the "Servicer Name" will typically be listed as "Default Resolution Group," confirming the loan's default status.
Review Repayment Agreement Details: If you've entered into a rehabilitation or repayment agreement, the "Repayment Agreement" section will show the start date, next payment due date, and amount due.

Credit Score Improvement Through Rehabilitation

After making nine rehabilitation payments, ED requests credit reporting agencies to remove the default record from your account, which may lead to an improved credit score.

Avoiding Scams

The DRG does not charge for its services, and the only payments you'll be asked to make are related to your repayment or rehabilitation agreement. Be wary of companies asking for "enrollment," "subscription," or "maintenance" fees to help you get out of default, as these could be scams.

Understanding the SAVE Plan and Its Current Status

The SAVE plan, introduced in 2023, aimed to provide a more affordable student loan repayment option. However, a legal challenge led by the state of Missouri has temporarily blocked the plan's full implementation.

The SAVE Plan Forbearance

Currently, student loans enrolled in the SAVE plan are under an administrative forbearance due to the ongoing legal challenge. This forbearance has paused payments and interest accrual for borrowers enrolled in the program, but it has also halted progress toward student loan forgiveness for income-driven repayment and Public Service Loan Forgiveness (PSLF).

Potential End of the SAVE Plan

In December 2025, the Department of Education reached a settlement agreement that would end the SAVE plan, ceasing new enrollments and requiring borrowers to transition to different repayment plans. The settlement awaits court approval, and once approved, borrowers will need to select a new repayment plan or have one chosen for them by the Education Department.

Implications for Borrowers

Borrowers in the SAVE plan should prepare for the end of the forbearance and the resumption of monthly student loan bills. Since SAVE was the most affordable repayment plan, payments in other plans are likely to be higher.

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Strategic Considerations for SAVE Plan Borrowers

Evaluate Repayment Options: The Education Department encourages borrowers to assess their repayment plan options now, given potential backlogs in IDR applications.
Consider Switching to IBR or ICR: Borrowers in SAVE with 25 years of qualifying payments (300 months) should consider switching to the IBR or ICR plans to be eligible for loan cancellation. Applying before the end of 2025 may protect them from federal tax consequences on the cancelled debt.
Understand the Impact on PSLF and IDR: Time spent in the SAVE forbearance does not count toward the repayment periods required for PSLF or IDR cancellation. Borrowers seeking progress in these programs should consider switching to a different IDR plan like IBR.

Temporary Pause on Collections for Defaulted Federal Student Loans

In April 2025, the Department of Education announced a temporary pause on collections efforts for defaulted federal student loans, reversing course after a five-year pause due to the Covid-19 pandemic. This decision came as a surprise, as many borrowers had already received Treasury Offset notices.

Rationale for the Pause

Education Secretary Linda McMahon cited the need to implement major student loan repayment reforms under the One Big, Beautiful Bill Act, including the rollout of a new income-driven repayment plan.

Implications for Borrowers in Default

While the pause offers temporary relief, it is essential to recognize that collections efforts will eventually resume. The Education Department encourages borrowers to use this opportunity to explore options for resolving defaulted loans.

Key Considerations During the Pause

Explore Options for Resolving Defaulted Loans: Contact the defaulted federal loan servicer to discuss available options.
Be Aware of Credit Reporting: Negative credit reporting associated with defaulted loans will continue during the pause.

Pause on Forgiving Certain Student Loans Under Income-Driven Repayment

There is also a temporary pause on processing student loan forgiveness under certain income-driven repayment plans, attributed to technical limitations and legal constraints.

Challenges in Processing Forgiveness

The department is currently unable to process student loan forgiveness for borrowers who have reached the 20- or 25-year threshold for discharge under the PAYE and ICR plans. System updates are underway, with hopes of resuming forgiveness processing by February.

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Impact of the SAVE Plan Litigation

The department is also unable to forgive student loans under any income-driven repayment plan for borrowers who reached their eligibility threshold during or after April 2025, due to a court order in the SAVE plan litigation.

Department of Education Resumes Collections

In April 2025, the Department of Education (ED) announced its Office of Federal Student Aid (FSA) would resume collections of its defaulted federal student loan portfolio. The department had not collected on defaulted loans since March 2020. This decision aims to protect taxpayers from bearing the cost of federal student loans.

Comprehensive Outreach Campaign

To ensure borrowers understand how to return to repayment or get out of default, the initiative will be paired with a comprehensive communications and outreach campaign.

Criticism of Previous Administration Policies

Secretary of Education Linda McMahon criticized the previous administration's policies, stating that the executive branch does not have the authority to wipe debt away and that the loan balances do not simply disappear.

Current State of Student Loan Debt

Currently, 42.7 million borrowers owe more than $1.6 trillion in student debt. More than 5 million borrowers have not made a monthly payment in over 360 days and are in default, while 4 million borrowers are in late-stage delinquency.

Resumption of Collection Activities

The Department of Treasury will begin administrative wage garnishment, and guaranty agencies will be authorized to begin involuntary collections activities on loans under the Federal Family Education Loan Program.

Support for Borrowers

FSA is committed to providing borrowers with clear information about their payment options and will launch an enhanced Income-Driven Repayment (IDR) process. FSA intends to enlist partners to assist in this campaign, emphasizing that student and parent borrowers, not taxpayers, must repay their student loans.

Navigating the Complex Landscape

The current state of student loan collections is complex, with various pauses, legal challenges, and policy changes impacting borrowers. By understanding these factors and taking proactive steps, borrowers can navigate this landscape effectively and work toward resolving their student loan obligations.

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