Students who are in default on federal student loans have two options to assist them in repaying their student loan obligation – Loan Consolidation and Loan Rehabilitation. Under both programs, the borrower must demonstrate an ability to repay the loan(s) by making regular, monthly payments. The basic requirements and advantages of each program are listed below:
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Loan Consolidation Program
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Loan Rehabilitation Program |
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Requires three consecutive monthly payments. |
Requires twelve consecutive monthly payments. |
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Extends payoff up to 30 years. |
Extends payoff up to 9 years. |
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All outstanding loans will be consolidated, and one monthly payment is required. |
Negative information reported to credit bureaus will be removed. |
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Credit bureaus will be updated to reflect "Paid Collection" account. |
NDSL/Perkins Loans are not eligible for Loan Rehabilitation. |
For further information regarding these options, please call
1-800-4-FEDAID
Loan Repayment
Once a student drops below half-time enrollment, leaves school or graduates, their federal student loans go into repayment. However, Direct Subsidized and Direct Unsubsidized loans will have a six-month grace period before regular payments are required. Loans are automatically placed in a standard repayment plan, but students can contact their loan servicer to choose a different repayment plan that works for them. Some possible repayment options are listed below. Use the Loan Simulator Tool to see which one is best for you https://studentaid.gov/loan-simulator/
Standard Repayment Plan
Graduated Repayment Plan
Revised Pay As You Earn
Pay As You Earn
Income-Based Repayment Plan
Income-Contingent Repayment Plan
Students who have accepted Unsubsidized Direct Loans or Graduate PLUS loans are encouraged to make interest payments while they are still enrolled as students. This will reduce the overall amount of loan due since interest is capitalized. Reach out to your loan servicer to inquire how to make these payments and for more information on loan repayments: https://studentaid.gov/manage-loans/repayment
Public Service Loan Forgiveness (PSLF)
Individuals who are employed full-time by a qualifying government or not-for-profit organization may be able to receive loan forgiveness after making 120 qualifying monthly payments under a qualifying repayment plan. Teachers in a low-income elementary, secondary or educational service agency for five complete, consecutive and full-time years may be eligible for forgiveness up to $17,500 on Direct Loans. Students are encouraged to review more information on qualifying employers and payment plans here: https://studentaid.gov/manage-loans/forgiveness-cancellation if they think their employment is eligible for this program.