Can You Settle Federal Student Loans for Less?

The federal government does not have the legal authority to forgive all student loans through executive action. But in narrow circumstances, it can compromise — meaning settle, discharge, or write off — federal student debt on a case-by-case basis, and it can suspend or terminate collection on defaulted loans it decides aren't worth pursuing.

That authority matters more in 2026 than it has in years. Collections on defaulted loans restarted in May 2025 after a five-year pandemic pause, then the Department of Education hit pause again in January 2026 — postponing wage garnishment and Treasury offsets while it rolls out the repayment overhaul that takes effect July 1, 2026. At the same time, the Department has begun handing its defaulted loan portfolio to the Treasury Department, and roughly 9 million borrowers are now in default. For that group, understanding when — and whether — the government will settle a balance is no longer a fringe question.