On February 18, the U.S. Department of Education announced new guidance urging higher education institutions to update and maintain default management and prevention plans in response to rising nonpayment rates among federal student loan borrowers. The department cited updated data showing that more than 1,800 institutions had nonpayment rates at or above 25 percent for borrowers entering repayment between January 2020 and May 2025. The announcement noted that the nonpayment rate serves as an early indicator of repayment challenges that could lead to loss of eligibility for federal student aid programs. The guidance stated that under the Higher Education Act, institutions with a cohort default rate of 30 percent or higher in a single year must develop and submit to the Department of Education a default prevention plan to improve repayment outcomes.

The guidance urged, among other things, proactive outreach to delinquent and defaulted borrowers, the use of borrower portals providing financial literacy resources, and partnerships with third-party entities to locate and assist borrowers. The guidance further encouraged institutions to monitor implementation updates regarding changes to the federal student lending system advanced under the One Big Beautiful Bill Act (covered by InfoBytes here). The department warned that institutions failing to address high nonpayment rates risk losing access to federal student aid programs and stressed that default management should be a priority across institutional leadership, not solely within financial aid offices.