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:
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.
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.
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.
With the consolidation loan, you’ll be eligible for most benefits that come with federal loans. But the default will stay on your credit history.
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.