Student Loan Debt Rehabilitation

The rehabilitation program can reduce your monthly payments, ease the burden of wage garnishment and tax-offsets, and remove your loan from default status.

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Benefits of Rehabilitation

  • Reduced monthly payments for borrowers experiencing financial hardship.
  • Tax-offsets (IRS withholding of tax refunds) and wage garnishment discontinues once the loan is rehabilitated.
  • Defaulted loans on the credit bureau no longer show as defaulted; all negative trade lines are removed once the loan is rehabilitated.
  • Eligibility for Title IV assistance (federal student aid) and the ability to return to school can be reinstated.
  • Eligibility for loan deferment and forbearance can be reinstated in order to postpone payment on new loans.
  • Payments made during rehabilitation count toward payments on the new loan.
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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.

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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.



Financial Asset Management Systems, Inc. (FAMS) is a debt collection agency. This is an attempt to collect a debt, and any information obtained will be used for that purpose. Calls to and from FAMS may be recorded for quality assurance.

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