Student loan rehabilitation is a one-shot program to get federal student loans out of default. Rehabilitation requires borrowers to make nine on-time payments — within 20 days of the due date — over 10 months. However, the CARES Act allows borrowers to skip those monthly payments and get credit for the nine required payments.
Lenders of private loans don’t offer rehabilitation as an option for loans that have defaulted. Here are some options to explore if you have charged-off private student loan debt.
Borrowers who signed the loan rehabilitation agreement before May 2021 should not have to make a payment to complete the program. The suspended payments count for the nine on-time payments.
You can check your payment status by contacting the Department of Education’s Default Resolution Group at 800-621-3115 or by checking MyEdDebt.
If you haven’t started student loan rehabilitation…
You’re not alone if you still have defaulted loans. More than 8 million borrowers remain in default on their federal student loans. You still have time to enter the rehabilitation program before collection activities resume in September 2022.
Follow these steps to rehabilitate student loans:
Step 1: Contact Default Resolution Group. After providing your Social Security number and birth date, a DRG representative will be able to locate your federal student loans in default that the Department of Education owns. They can also check the National Student Loan Data System to see if you have Federal Perkins Loans or FFEL Program loans in default with a private collection agency.
Step 2: Agree to a payment amount. The nine payments must be “reasonable and affordable,” which usually means 15% of your discretionary income. But if you can’t afford that amount, you can ask for a payment based on your income, expenses, and family size. Those payments can be as small as $5 per month. Remember that you won’t have to make your first payment until September 2022.
Step 3: Sign a rehabilitation agreement. To be fully enrolled in the rehabilitation program, you must sign a written agreement. The letter confirms the loans included in the rehabilitation, the monthly payment amount, and your eligibility for new financial aid.
Step 4: Pay as required. Before payments resume in September 2022, contact the collection agency to schedule your remaining payments to come out of your bank account with an auto draft.
Learn More: Student Loan Rehabilitation vs Consolidation: All Your Questions, Answered
If you started student loan rehabilitation…