How does student loan rehabilitation get you out of default?

What is loan rehabilitation?

It is one of the main ways to get a federal student loan out of default. Federal Student Aid names rehabilitation and consolidation as the main routes, with repaying the loan in full as a third.1

Default itself has a definition. A Direct Loan or FFEL Program loan is in default when no scheduled payment has been made for at least 270 days. From that point the whole balance is due at once, tax refunds may be withheld, wages may be garnished, and you lose deferment, forbearance and the choice of repayment plan.2 3

What do you have to do?

These are the requirements for Direct Loans and FFEL Program loans. Perkins Loans have their own version: a full monthly payment each month, within 20 days of the due date, for nine consecutive months.1

1. Start the process at StudentAid.gov/defaultsupport or with your loan holder.1
2. Agree in writing to make nine voluntary, reasonable and affordable monthly payments. The loan holder sets the amount, which depending on your income could be as low as $5.1
3. Make each payment within 20 days of its due date, and all nine within a period of 9 or 10 consecutive months, depending on the type of loan.1
4. After the ninth payment, the loan is no longer in default.1

Your loan holder helps with this for free. A company that asks for enrollment, subscription or maintenance fees to get you out of default should be avoided.4 1

What happens to garnishment and offsets while you rehabilitate?

They can continue for a while. Money taken by wage garnishment or Treasury offset does not count toward the nine payments, and those collections continue until the loan is out of default or you have made at least five rehabilitation payments.1

When we checked on October 13, 2026, Federal Student Aid said collections through Treasury offset and administrative wage garnishment were paused. The page gives no end date, so confirm the current status.5

What do you get back?

Once the loan is rehabilitated, the default status is removed and collection through wage garnishment or Treasury offset stops. You regain deferment, forbearance, a choice of repayment plans, loan forgiveness and eligibility for federal student aid.1

The record of the default is removed from your credit history. Late payments that were reported before the default stay.1

Rehabilitation is currently a one-time opportunity for each loan. If you rehabilitate a loan and default on it again, you cannot rehabilitate it a second time. Beginning July 1, 2027, a borrower will be able to rehabilitate a defaulted loan twice over the loan's lifetime.1 6

Rehabilitation or consolidation?

Both end the default and restore eligibility for deferment, forbearance, repayment plans, forgiveness programs and federal student aid. They differ in speed and in what they do to your credit history.1

Which one fits depends on your loans and your situation. Your loan holder can explain both at no cost.4 1

Does rehabilitation change anything in bankruptcy?

It does not change whether the loan can be discharged. Student loans are generally not discharged in bankruptcy unless repaying them would impose an undue hardship, and that rule does not depend on whether the loan is in default.7

It can matter as evidence. Under the Justice Department's guidance for federal student loan cases, making a payment and engaging with the loan holder about payment options are among the steps that are evidence of good faith. Government attorneys are told to look at the entire life of the loan, so an attempt at rehabilitation that did not last still belongs in your history.8

It also reopens other options. A loan in default is not eligible for income-driven repayment, and rehabilitation restores the choice of repayment plans.2 3 1