Education, Treasury Launch Online Support Center for Defaulted Student Loans
The U.S. Department of Education and U.S. Department of the Treasury have launched a new online center designed to help borrowers resolve defaulted federal student loans, consolidating rehabilitation, consolidation, payments, and other default-resolution resources within StudentAid.gov.
The Defaulted Loans Support Center is part of the agency’s broader Federal Student Assistance Partnership and comes as the federal government works to move millions of borrowers out of default and back into repayment.
New Portal Moves Default Resolution Online
The Education Department said the new portal replaces older websites and processes that relied heavily on mail and fax submissions.
Borrowers can use the center to understand the consequences of default, compare options for resolving default, apply for loan rehabilitation or consolidation, make payments, and review repayment plans and potential loan-discharge options.
The rehabilitation process can also be completed within StudentAid.gov. Borrowers can upload supporting documents, review estimated payments, electronically sign agreements, and track their progress online.
The agencies said the portal is intended to simplify a process that previously required borrowers to navigate multiple systems and paper-based procedures.
According to the Education Department, early feedback from the portal’s beta testing showed 89% of borrowers surveyed found the application easy to complete, 86% understood what to do next, and 84% said the process took a reasonable amount of time.
Rehabilitation and Consolidation Increase
The new center was developed through the Education-Treasury Federal Student Assistance Partnership, which was announced in March.
The Education Department said approved applications for loan rehabilitation have increased 69% since the partnership launched. Consolidations out of default have increased 95% following the correction of what the department described as a technical issue that had made consolidation more difficult.
The department also said more than 5 million borrowers have remained in default for more than six years, while another 5 million borrowers entered default in less than a year.
For organizations involved in federal student loan servicing, recovery and borrower communications, the digital center represents another significant change to the government’s default-resolution infrastructure. Greater use of online rehabilitation and consolidation could affect how borrowers move through collections and return to active repayment.
1% Auto-Pay Interest Reduction Extended
The Education Department separately extended enrollment for a temporary 1% interest rate reduction.
Borrowers who enroll in auto pay by Dec. 31, 2026, as well as eligible borrowers already enrolled, can receive the reduced rate through June 30, 2028. The department said nearly 2 million borrowers have enrolled in auto pay since the temporary benefit was introduced.
Before July 1, borrowers enrolled in auto pay generally received a 0.25% interest rate reduction. The temporary program increases that reduction to 1% for eligible borrowers.
Borrowers currently in default cannot immediately enroll in auto pay. They must first return their eligible loans to good standing, including through consolidation, and enroll in a repayment plan. The Defaulted Loans Support Center provides a pathway for borrowers to complete that process.
The department said the incentive is also intended to help borrowers maintain the on-time payments required for certain benefits under the new Repayment Assistance Plan.
Federal Student Loan System Continues Transition
The launch comes amid broader changes to federal student loan repayment and servicing following changes enacted this year and the end of the Saving on a Valuable Education, or SAVE, repayment plan.
For the ARM industry, the new portal is particularly relevant because it centralizes several steps that determine whether defaulted accounts remain in collections or transition back into repayment. The reported increases in rehabilitation and consolidation suggest federal efforts to move borrowers out of default are beginning to change the flow of accounts through the default-resolution process.
