Operators are being offered the chance to transfer all revenue and cost risk to the Government after passenger numbers fell by up to 70% and ticket sales dropped by two-thirds.
Industry body the Rail Delivery Group (RDG) said it “strongly welcomes” the proposal.
The emergency measures will be in place for an initial period of six months.
The DfT said they will “minimise disruption to the rail sector” and protect key workers who depend on the railways.
Allowing operators to enter insolvency would cause “significantly more disruption to passengers and higher costs to the taxpayer”, the department added.
Rail timetables have been slashed because of Covid-19.
Anyone holding an advance ticket will be able to get a refund free of charge, while administrative fees have been waived for season ticket refunds.
Transport Secretary Grant Shapps said: “We are taking this action to protect the key workers who depend on our railways to carry on their vital roles, the hardworking commuters who have radically altered their lives to combat the spread of coronavirus, and the frontline rail staff who are keeping the country moving.
“People deserve certainty that the services they need will run or that their job is not at risk in these unprecedented times.
“We are also helping passengers get refunds on Advance tickets to ensure no-one is unfairly out of pocket for doing the right thing.
“These offers will give operators the confidence and certainty so they can play their part in the national interest.”
The department said fees paid to rail firms by the Government are intended to incentivise them to meet performance targets, and the maximum fee attainable will be “far less than recent profits earned by train operators”.
RDG chief executive Paul Plummer said: “The industry strongly welcomes the Department for Transport’s offer of temporary support and, while we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need.”