WASHINGTON, D.C. — The U.S. Department of Education on Tuesday issued new guidance urging colleges and universities to strengthen efforts aimed at reducing federal student loan defaults.
The guidance reminds institutions of higher education of their shared responsibility under Title IV of the Higher Education Act to support borrowers throughout the repayment process. It follows earlier guidance issued May 5, 2025, that encouraged institutions to reach out to former students to reduce delinquency and prevent defaults .
According to the department, institutions are encouraged to be proactive in contacting former students who are delinquent or in default on their federal student loans. The guidance outlines recommended best practices for developing and strengthening default management and prevention plans.
Among the suggestions:
- Leveraging existing communication channels and technology to improve outreach
- Creating borrower portals that include financial literacy tools and repayment information
- Dedicating staff to provide financial literacy services and in-person assistance
- Using program-level earnings data to improve entrance counseling
- Reviewing financial aid packaging practices in light of recent legislative changes
The department emphasized that default prevention should not rest solely with financial aid offices, but should be a priority for institutional leadership .
The announcement comes as the department released updated nonpayment rates by institution, which it said may serve as an early indicator of risk. The data show that more than 1,800 institutions have nonpayment rates at or exceeding 25 percent .
Institutions with high cohort default rates (CDRs) risk losing eligibility to participate in federal student aid programs. Schools may lose access to programs such as Direct Loans and Pell Grants if their CDR reaches 30 percent or higher for three consecutive years, or 40 percent in a single year .
Under Secretary of Education Nicholas Kent said rising nonpayment rates require institutions to do more to support successful repayment outcomes. The department stated that while borrowers are responsible for repaying their loans, institutions also play a role in preparing students for repayment and helping them understand the consequences of nonpayment .
The guidance also encourages institutions to inform delinquent borrowers about new repayment options and loan rehabilitation opportunities, and to establish default prevention task forces when required under federal law .
Institutions with a cohort default rate of 30 percent or higher in a single year are required to develop and submit a default prevention plan outlining measurable objectives and strategies to reduce defaults .
The Department of Education said it plans to continue working with institutions as it implements federal student loan reforms scheduled to take effect July 1.
