Information on defaulting is not my strong suit. Someone else can probably help you better. Student Loan Hero is also a great resource.
From the wording of the email I would guess that they just took back the loan and are going to reassign it to another collection agency. When will that happen? It varies. It should update on the NSLDS website or you could always call Dept of Education.
Your loan is still in default though. To get out of default it requires you to rehab or consolidate. Given that you don't have the 9-10 months to rehab, I would say now would be a good time to probably just pay off the loan. There is no guarantee that whatever collection agency it is placed with after it is reassigned will not report.
The other option is you could consolidate right now. This would not remove the default, but it's not showing up for you anyway. There is no need to make voluntary payments first, although if you don't you'll be stuck with the IDR plans. Again, since you want to pay off the loan, it won't matter. It will initially show up as a 100% utilization new loan but after you pay it off you'll have a positive closed tradeline on your credit report for 10(?) Years. It all depends on what your credit report looks like now to figure out if you could benefit.
If you don't do either of the above options, I don't know if the garnishment stops. Contact D of Ed.
No matter what you choose, sounds like you'll be doing great having dealt with the debt. Congrats on paying off your loans soon. 🙂
Hi, DefaultQueen here (lol, I mean, I should be ashamed),
I would do what Sabii is suggesting and either pay it off lump before it appears on your reports or go through consolidation.
Garnishment is ALSO taking on a fee, so you would actually spend less paying it off, even if consolidated.
If you do consolidate, it's a (new) positive tradeline, and there's nothing stopping you from paying it off early (either as a lump or just with extra/larger payments).
I'm currently on track to pay my own off in 3 years by tripling my payments, even though I'm on an IDR plan, there's no early payment penalty, nothing bad happening, but more importantly no extra collection fees for garnishment.