Collections Temporarily Paused
Due to the COVID-19 payment pause, most collections on federal student loan debt have stopped. While the payment pause is ending at the end of August 2023, the Department of Education announced a new program, called Fresh Start, to help borrowers get out of default quickly and easily before collections begin again.
The Fresh Start program will run until one year after the payment pause ends. The pause on collections will continue for all loans that are eligible for Fresh Start (loans that defaulted before the pandemic) through the end of the Fresh Start period. Don’t miss out. See our page on Fresh Start for more information about signing up for this time-limited program.
Loan rehabilitation is one way to get your student loan out of default. Under a loan rehabilitation agreement, you make nine consecutive payments that are based on your income to your loan holder (for Perkins Loans you have to make the full standard payment). For more information on loan rehabilitation, see the Department of Education’s website.
How Do I Apply for Loan Rehabilitation to Get Out of Default?
To start the loan rehabilitation process, contact your loan holder or loan servicer.
What Happens After My Loans are Rehabilitated?
After you make your last payment under your loan rehabilitation agreement, your loan will be removed from default; collections, such as wage garnishment and tax refund offset, will stop; and you will be placed back into repayment. Your loans may also be transferred to a new loan servicer.
You will get a notice from your loan servicer about returning to repayment after you get out of default. You will have to continue to make monthly payments on your loans to avoid defaulting again, so pay close attention to any notices your loan holder or servicer sends you about your new payment amount and due date.
It’s likely that your loan servicer will put you into a standard repayment plan after your loan gets out of default, but you may be eligible for lower payment through an income-driven repayment (IDR) plan. Under an IDR plan, your payments are based on your income and family size and could be as low as $0 per month. You should ask your loan holder or servicer about your loan repayment options, including IDR plans, before your repayments start.
Can I Complete a Loan Rehabilitation More Than Once?
No. If you rehabilitate a defaulted loan and then default again, you can’t rehabilitate a second time. Rehabilitation is a one-time opportunity. However, this one-time rehabilitation rule does not apply to borrowers who completed a rehabilitation agreement during the pandemic payment pause or borrowers who use Fresh Start to get out of default.