How Rehabilitation Works
Student loan rehabilitation is an opportunity to clear the default on a federal student loan and regain eligibility for federal student aid.
FAMS will work with you to establish a satisfactory payment arrangement. After nine on-time, voluntary payments are made according to your agreement, the loan can be rehabilitated and the default status removed from your credit bureau history.
The rehabilitation is complete when the required payments have been made, the rehabilitation paperwork that has been sent to you has been completed correctly, signed, and returned, and the account has been removed from default and purchased by an eligible lender.
Are You Eligible?
Most borrowers are eligible for loan rehabilitation. However, there are a few exceptions:
- If you completed a rehabilitation after August 14, 2008, you are no longer eligible for this program.
- If you have any loans that have been deemed to be ineligible, you will not be able to rehabilitate those loans.
Want To Know More?
You cannot successfully complete your rehabilitation unless you make at least nine, on-time, full monthly payments.
It may possible to change your payment schedule, however, you will have to contact a FAMS agent for approval. Approvals are assessed on a case-by-case basis.
- If you completed the Rehabilitation program prior to 8/14/2008, it will not affect your eligibility.
- If you completed the Rehabilitation after 8/14/08, you are no longer eligible.
- If you began a rehabilitation, but did not complete it, you may still be eligible. Contact FAMS for more information.
Only voluntary payments count toward your rehabilitation. Payments obtained by Federal or State offsets, wage garnishment, trustee payments or income or asset executions will not satisfy the rehabilitation requirements.
This option is not available through FAMS. Contact your private loan lender or servicer to determine if this an option for you.
Possibly. Once your rehabilitation is complete, the default status is removed and the loan is returned to a loan servicer. At that time you can request a repayment plan that meets your financial needs, or request deferment or forbearance.
After the final rehabilitation payment has been made the account must be removed from default, and purchased by an eligible lender before the wage garnishment/tax offset will end.