What is Student Loan Rehabilitation?

Question: What is Student Loan Rehabilitation?

Answer:

If you've defaulted on a student loan, there's a good chance it's haunting everything from your credit report to your paycheck. Thankfully, student loan rehabilitation can put you back in good standing and help you get your finances back on track.

When you experience student loan rehabilitation, the following occurs:

• You'll no longer be consider "in default" by your lender or on your credit report.
• You're paycheck will no longer be garnished to repay your loan.
• The IRS ceases collecting money from your tax refund.
• You once again become eligible for forbearance, deferment, and other financial aid programs.

In order to undergo student loan rehabilitation, you must make nine payments on time (within 20 days of the monthly due date for Direct and FFEL loans) not counting wage garnishments or other collection actions.

While Perkins loans are very strict on this repayment requirement, Direct and FFEL loans allow you to miss one payment in a ten-month period.