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How to fill out the federal loan rehabilitation form
Step-by-step instructions to get your federal student loans out of default.
If your federal student loans are in default, not all hope is lost: You have a few options, including rehabilitation. This opens you up to the benefits of federal student loans after making several consecutive repayments adjusted to your financial situation. And applying can be as simple as contacting your lender.
How federal loan rehabilitation works
Federal loan rehabilitation is a way to get out of default on federal student loans in the Direct, FFEL or Perkins Loan programs. It involves making nine monthly repayments toward your loans within 20 days of each due date over a 10-month period.
What does rehabilitation do?
- Removes the default from your credit history.
- Makes you eligible for federal aid again.
- Makes you eligible for deferment and forbearance.
- Stops all collection payments like wage garnishments.
- Gives you access to more repayment plans.
- Makes you eligible for forgiveness programs.
What do I need to do before I apply?
If you decided federal loan rehabilitation is right for you, you’ll first want to contact your loan servicer and compile all of the documents you need to fill out the Income and Expense Form.
Contact your servicer
Reach out to your servicer to let them know you’re interested in rehabilitation. Perkins Loans require nine full monthly repayments in order to get out of default. But if you have a Direct or FFEL Loan, your servicer will offer you a monthly repayment based on the following formula:
15% of your discretionary income / 12
Follow these steps to calculate it yourself:
1. Calculate your discretionary income
Your discretionary income is the difference between your annual income before taxes and 100% of the poverty guideline for your family size and state. You can find the poverty guideline for your state on the Department of Health and Human Services (HHS) website.
- Find your annual salary before taxes.
- Go to the HHS website and find the poverty guideline for your state by household size — not including roommates.
- Subtract the poverty guideline from your salary.
Let’s take a look at an example. Say you make $30,000 a year and live in California by yourself.
- Annual gross income: $30,000
- Poverty guideline for a single-person household in California: $12,140
- Discretionary income: $30,000 – $12,140 = $17,860
2. Calculate your monthly payment
From here, calculating your payment is straightforward. Multiply your discretionary income by 15% and divide it by 12.
In the example above, the monthly repayment would be:
- Discretionary income x 15%: $17,860 x 15% = $2,679
- Monthly repayment: $2,679 / 12 = $223.35
If you can afford the monthly repayments, you’re done. Otherwise, you can ask your lender for a lower repayment based on your income and expenses by completing and submitting the Loan Rehabilitation: Income and Expense Form, along with all supporting documents.
Have these documents and information on hand
Make sure you have the required documents proving how much you make and spend in a month. It’ll make it easier to calculate how much you spend when you fill out the Income and Expense Form.
|Who it applies to||Document||Where to get it|
|Everyone.||Your most recent federal student loans statements.||Your loan servicer.|
|Applicants with private student loans.||Your most recent private student loans statements.||Your loan servicer.|
|Employed applicants.||Signed copy of your 1040 tax return for the most recent year or a tax transcript form from the IRS.|
Self-employed applicants can also provide a 1040-ES worksheet.
|Your personal records or request a transcript on the IRS website.|
|Everyone.||Copies of your two most recent pay stubs.||Your employer.|
|Married applicants.||Signed copy of your spouse’s 1040 tax return for the most recent year or a tax transcript form from the IRS.|
Self-employed applicants can also provide a 1040-ES worksheet.
|Your personal records or request a transcript on the IRS website.|
|Married applicants.||Copies of your spouse’s two most recent pay stubs.||Your spouse’s employer.|
|Applicants receiving child support.||A copy of your divorce decree, child support order or a written statement detailing how much you receive.||The county clerk’s office where the decree or order was issued.|
|Applicants paying child or spousal support.||A copy of your pay stub or court order.||Your employer or the county clerk’s office where the court order was issued.|
|Applicants receiving Social Security.||A statement of benefits from the Social Security Administration.||The Social Security Administration.|
|Applicants receiving workers’ compensation.||A copy of a recent pay stub or benefit letter.||Your employer.|
|Applicants receiving public assistance.||A copy of your public assistance award letter.||Your public assistance program.|
|Applicants living outside the US or Puerto Rico.||A copy of your mortgage statement or rental lease.||Your mortgage lender or landlord.|
|Applicants living outside the US or Puerto Rico.||Utility, Internet and phone bills.||Your utility company, Internet provider and phone company.|
|Applicants living outside the US or Puerto Rico who own a car.||Copies of your car payment, insurance, gas expenses, maintenance and registration.||Your lender, insurance provider and personal records.|
|Applicants with more than $60 in monthly medical or dental expenses.||Proof of out-of pocket medical and dental costs, including receipts for prescription drugs and doctor’s visits.||Your personal records and doctor’s or dentist’s office.|
|Applicants with health insurance.||A copy of your premium statement or pay stub if you receive it through work.||Your insurance provider or employer.|
|Applicants with life insurance by court order.||Copies of your premium statement and court order.||Your insurance provider and the county clerk where the order was issued.|
|Applicants paying for childcare.||Receipts from the daycare provider.|
Also include private school receipts and a copy of the court order if your child is there by court order.
|Your daycare provider or child’s school and the county clerk’s office where the court order was issued.|
How to fill out the Loan Rehabilitation: Income and Expense Form
Your servicer might send you a copy of the Loan Rehabilitation: Income and Expense Form. Otherwise, you can download it on the Federal Student Aid website. Follow the step-by-step instructions below to complete each section. Print clearly in blue or black ink.
Section 1: Borrower information
Enter the following information in the required fields:
- Your Social Security number
- Your full name
- Your mailing address
- Your primary phone number
- Another phone number where you can be reached or write “N/A”
- Your email address if you want to be contacted by email
Section 2: Household income and reasonable and necessary monthly expenses
For items 1 through 7, enter how much you and your spouse earn each month from the following sources:
- Your job
- Your spouse’s job
- Child support
- Social Security
- Workers’ compensation
- Public assistance, also including what types of assistance you receive
- Other income, with a description of what it is
For item 8, add up the numbers entered for 1 through 7 to get your total monthly income. If your total monthly income is $0, explain how you’re supporting yourself in the box next to item 9.
For items 10 through 21, write how much you spend each month on the following items:
- Rent, mortgage payments or other housing expenses
- Phone and Internet services
- Nonelective medical or dental costs
- Necessary insurance, such as health insurance
- Transportation, including the number of vehicles your household owns
- Child care or dependent care
- Child or spousal support
- Federal student loans
- Private student loans
- Other expenses, with a description
For item 22, add up all of the expenses you listed for items 10 through 21.
Section 3: Family size and spouse identification
Write your name and Social Security number at the top of this page before you do anything else.
Next to item 23, write your family size. Include your spouse, children and anyone who currently gets more than half of their financial support from you and will continue to do so for the next year. Also include any unborn children that are due within the next year.
If you want to rehabilitate a Direct Consolidation Loan or Federal Consolidation Loan in both your and your spouse’s name, check “Yes” next to item 24 and write their full name and Social Security number. Otherwise, check “No.”
Section 4: Understandings, certifications and authorizations
Carefully read the 10 understandings, two certifications and authorization to make sure you’re aware of your responsibilities to repay the loan. Sign and date the loan document, writing the date as mm-dd-yyyy.
If you’re applying to rehabilitate a consolidation loan also in your spouse’s name, they must sign and date this document as well.
Mail in your Income and Expense Form and supporting documents
If you got your form from your servicer, send it to the address printed at the bottom of page 4. Otherwise, send it to your loan servicer.
You can find your loan servicer’s mailing address on your federal loan statement. After your servicer reviews the form and documents, it’ll give you another adjusted offer based on your income and expenses.
How else can I get out of default?
Rehabilitation isn’t the only way to get a federal loan out of default. The simplest way is to pay it off in full — though that option might not be possible if you’re struggling to make repayments.
You can also get out of default by applying for a Direct Consolidation Loan. You’ll either need to agree to pay off the loan with an income-driven repayment plan or make three full, on-time repayments in a row before applying for consolidation.
Student loan rehabilitation vs. consolidation
With the consolidation loan, you’ll be eligible for most benefits that come with federal loans such as deferment and forbearance. But the default will stay on your credit history. While both options are far better than staying in default, each have their own separate benefits.
Consider loan rehabilitation if…
- You want the default status removed from your credit history.
- Your wages are already being garnished.
- You want fewer fees added to your existing debt.
Consider loan consolidation if…
- You have multiple loans in default.
- You want to get out of default faster.
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Rehabilitating your federal loans can be as simple as reaching out to your loan servicer. But if you still aren’t able to afford repayments based on your income, you’ll have to provide a more detailed account of your income and expenses.
To learn more about how student loans work, check out our guide.
Frequently asked questions
Can I rehabilitate a loan if I default again?
No. Rehabilitation is a one-time chance. However, you can still consolidate your loan or pay it off in full if you find yourself in default a second time.
Will rehabilitation improve my credit?
It can help improve your credit since the default will no longer show up on your credit report. But it won’t be perfect, as all late payments will remain on your report.
What’s a loan holder?
A loan holder, also known as a loan servicer, is the company that handles your loan repayments.
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