Millions of federal student loan borrowers in default now have a new online tool to deal with their debt. The U.S. Departments of Education and the Treasury said September 30 that they launched the Defaulted Loans Support Center, a portal meant to help borrowers understand their options, make voluntary payments, and apply online to rehabilitate or consolidate defaulted loans.
The launch marks the first public phase of the Trump administration’s plan to shift management of defaulted federal student loans to Treasury. Education officials said the change is meant to modernize a process that had required printed paperwork for key steps, even as the government’s defaulted loan population kept rising.
Federal agencies open the first phase of the transfer
Education and Treasury announced the new center in a joint release on September 30. The departments said the portal is designed as a centralized hub for borrowers in default who want to return their loans to good standing. Treasury Secretary Scott Bessent said the system is meant to give borrowers “a clearer path back to repayment,” while Education Secretary Linda McMahon said the department “was never intended to serve as the fifth largest bank in America.”
The administration first announced the broader Treasury partnership in March 2026. At that time, Education said Treasury would begin by supporting defaulted student loans and later work toward operational support for non-defaulted federal student loan debt, where allowed by law. The new support center is the first launch tied to that handoff.
Business Insider reported that officials beta-tested the portal with 15,000 borrowers over the past few months. A senior Education Department official told the publication that more than 5,000 of those borrowers made a payment online during the testing period. The same official described the portal as “a complete modernization” of how the government works with borrowers in default.
What is confirmed is national, not state-by-state. Federal Student Aid data cited by Business Insider showed that, through June 30, 9.3 million borrowers were in default, up by 400,000 from the prior quarter. Another 1.5 million borrowers were in late-stage delinquency and at risk of entering default within six months.
The agencies have not said how many borrowers in any one state will use the new portal, and they have not released a state breakdown with the launch. They also have not detailed which parts of the defaulted portfolio moved first beyond describing the effort as phased. For borrowers, the practical shift is that some default-resolution steps that once required mailed forms can now be started online.
Treasury’s student loan debt management pages show the federal government already handles collections support for defaulted loans, while older federal debt resolution systems remain online. Federal Student Aid guidance still warns that default can trigger severe consequences, including wage garnishment and Treasury offset, though Education said in January 2026 that involuntary collections would remain delayed while repayment changes continued.
The government’s stated reason is operational. Education and Treasury have said the partnership is intended to improve borrower communications, strengthen accountability, and use Treasury’s financial operations experience to manage a troubled portfolio. The Education Department’s March announcement said the federal student aid portfolio was nearing $1.7 trillion, with nearly a quarter of borrowers in default.
Not everyone is sold on the shift. Business Insider reported that Sarah Bloom Raskin, a former deputy treasury secretary in the Obama administration, warned that collecting defaulted student loans is “operationally quite challenging.” More than 60 Democratic lawmakers also urged Education in June to stop the transfer, according to that report, while a Republican-led bill is pushing to write the plan into law.
For now, the next confirmed step is more transition work. Education officials told Business Insider that work on the second phase is underway, though they did not provide details. The administration also has not said when the current pause on involuntary collections, including wage garnishment and seizure of some federal benefits, will end. What borrowers do have now is a live federal portal built specifically for defaulted loans, and agencies say it is meant to move people back toward repayment faster.