Loan rehabilitation is a one-time process that allows borrowers who have defaulted on federal student loans to remove the default status by making nine on-time, voluntary payments within a 10-month period. Successful rehabilitation removes the default from your credit history, stops collection activities (wage garnishment, tax refund seizure), restores eligibility for federal financial aid, and reinstates access to income-driven repayment plans, deferment, and forbearance.
10 steps across 1 sections
1. Steps Process
- Contact your loan holder. Determine who holds your defaulted loans:
- Log into studentaid.gov to find your loan holder
- For loans held by the Department of Education, the holder may be a collection agency like ECMC, Maximus, or others
- Contact them to express your interest in loan rehabilitation
- Sign a Rehabilitation Agreement. Your loan holder will send you a Rehabilitation Agreement Letter that outlines:
- Your calculated monthly payment amount
- The 10-month rehabilitation period
- Your rights and responsibilities
- Required documentation
- Determine your monthly payment. The standard rehabilitation payment is calculated as:
Common Mistakes
- Making involuntary payments and expecting them to count
- Missing more than one payment (Direct/FFEL)
- Not requesting a reduced payment
- Thinking you can rehabilitate more than once
- Stopping payments after the 9th payment
Pro Tips
- Act quickly after default
- Document every payment
- Request the Income and Expense Form if the standard payment is too high
- Consider consolidation as an alternative
- Check your credit report after completion