Actually, borrowers default all the time. There are no guarantees on these government “direct” loans. When a borrower defaults on a direct loan, the borrowers tax refunds, including EITC, are withheld by the IRS until the debt is paid in full. In addition, the borrower’s credit score is dinged with a loan default notice that never leaves the borrowers record. That turns out to be pretty crippling when the borrower wants to buy a car or a house on credit at some future point.
It’s a Default but they still owe the money so it’s not like a default. A default is usually when you are able to ignore it. The government will stay on you as long as you owe the money or until you negotiate a discharge.