To inquire about rehabilitating your defaulted loans, contact your loan holder. If you don’t know who your loan holder is, go to the National Student Loan Data System (NSLDS), which is the central database for all federal student loan information. If ECMC holds your loans, contact us.
Here are the details on loan rehabilitation:
How loan rehabilitation works
You and your loan holder enter into a rehabilitation agreement that defines monthly payment amounts and due dates for your 9-month qualification period. The rehabilitation agreement you sign with your loan holder will set reasonable, affordable monthly payments, typically 1% of your outstanding balance. You may be able to qualify for lower payments if you can demonstrate financial hardship.
Once you consent to your rehabilitation agreement, you are obligated to make your 9 monthly payments on time (within 20 days of the due date). You cannot pay ahead or make extra payments to speed up the process. If you fail to fulfill the terms of your rehabilitation agreement, your loans will stay in default.
The rehabilitation is final once a lender purchases the loan, which could take some time. When it does happen, though, the defaulted loan may even be removed from your credit bureau report, and your loan information is updated on the National Student Loan Data System (NSLDS). Once the defaulted loan is removed from your NSLDS account profile, you can regain eligibility for deferments, forbearances and Title IV financial aid.
You may experience a delay in your loan account being updated on NSLDS. If so, contact your loan holder for help. If ECMC holds your loans, contact us.
You only get one chance to rehabilitate your loans. If you default again in the future, you will not be able to rehabilitate your loans again.Back to top
What loan rehabilitation does
Loan rehabilitation is a powerful tool for dealing with default. Completing rehabilitation restores your loans to good standing and helps to repair your credit. Just entering loan rehabilitation has immediate effects on your defaulted loans.
Entering loan rehabilitation:
- Stops all collections activity and legal proceedings
- Prevents wage garnishment
- May protect your state and federal tax refunds from IRS offsets
Successfully completing a loan rehabilitation program restores your loans to their pre-default status:
- Your loans return to good standing
- You are eligible for deferment, forbearance and alternative repayment options
- You can receive additional student loans and Title IV financial aid
- Your loans reset to their original terms, interest rate and repayment period, minus your 9-month rehabilitation period
- Your credit report shows positive progress in repaying your loans, which may repair some of the damage done by default
Please note: You only get one chance at loan rehabilitation. If you default again, you cannot try to rehabilitate them again.Back to top
Loans that qualify for rehabilitation
- Federal Stafford loans (formerly GSL)
- Federal Perkins loans (formerly NDSL)
- Federal PLUS (Parent Loans for Undergraduate Students)
- Federal Grad PLUS (PLUS loans for graduate and professional students)
- Federal Consolidation loans
- Federal SLS (formerly ALAS)
- Health Professions Student Loans (HPSL)
- Nursing Student Loan (NSL)
Back to top
Important rehabilitation rules
Rehabilitation has important limitations and rules:
- Rehabilitation is a one-time-only opportunity. If you default again, you won’t be able to rehabilitate your loans.
- Only defaulted loans can be rehabilitated.
- Only certain loans qualify for rehabilitation, see above.
- No legal judgment can exist against you for your student loans. If you have a default judgment, contact your loan holder to learn how to pursue rehabilitation.
Back to top
Whom to contact about loan rehabilitation
To rehabilitate your defaulted loans, contact your loan holder. If you don’t know who your loan holder is, go to the National Student Loan Data System (NSLDS), which is the central database for all federal student loan information.Back to top