diff --git a/awx/main/models/mixins.py b/awx/main/models/mixins.py
index 1186797b09..82cbeca5de 100644
--- a/awx/main/models/mixins.py
+++ b/awx/main/models/mixins.py
@@ -163,6 +163,19 @@ class SurveyJobTemplateMixin(models.Model):
 
     def _survey_element_validation(self, survey_element, data):
         errors = []
+        # make a copy of the data to break references (so that we don't
+        # inadvertently expose unencrypted default passwords as we validate)
+        data = data.copy()
+        if all([
+            survey_element['type'] == "password",
+            data.get(survey_element['variable']) == '$encrypted$'
+        ]):
+            # replace encrypted password defaults so we don't validate on
+            # $encrypted$
+            data[survey_element['variable']] = decrypt_value(
+                get_encryption_key('value', pk=None),
+                survey_element['default']
+            )
         if survey_element['variable'] not in data and survey_element['required']:
             errors.append("'%s' value missing" % survey_element['variable'])
         elif survey_element['type'] in ["textarea", "text", "password"]:
diff --git a/awx/main/tests/unit/models/test_survey_models.py b/awx/main/tests/unit/models/test_survey_models.py
index d283c57081..6362a25e61 100644
--- a/awx/main/tests/unit/models/test_survey_models.py
+++ b/awx/main/tests/unit/models/test_survey_models.py
@@ -8,6 +8,7 @@ from awx.main.models import (
     JobTemplate,
     WorkflowJobTemplate
 )
+from awx.main.utils.encryption import encrypt_value
 
 
 @pytest.fixture
@@ -143,6 +144,21 @@ def test_optional_survey_question_defaults(
         assert 'c' not in defaulted_extra_vars['extra_vars']
 
 
+@pytest.mark.survey
+def test_encrypted_default_validation(survey_spec_factory):
+    element = {
+        "required": True,
+        "default": encrypt_value("test1234", pk=None),
+        "variable": "x",
+        "min": 0,
+        "max": 8,
+        "type": "password",
+    }
+    spec = survey_spec_factory([element])
+    jt = JobTemplate(name="test-jt", survey_spec=spec, survey_enabled=True)
+    assert not len(jt.survey_variable_validation({'x': '$encrypted$'}))
+
+
 @pytest.mark.survey
 class TestWorkflowSurveys:
     def test_update_kwargs_survey_defaults(self, survey_spec_factory):