Student Loan Rehabilitation: What It Is and When to Use It

You can rehabilitate defaulted student loans only once to get them back in good standing.
Ryan LaneSep 1, 2021

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Student loan rehabilitation is a one-shot opportunity for borrowers to get federal student loans out of default. Private student loans are not eligible for rehabilitation.

Rehabilitation takes longer than student loan consolidation, the other primary option for default recovery. But rehabilitation is generally the better choice because it:

You can only rehabilitate your loans once, so make sure you have a plan to continue making payments when you get out of default.


Follow these steps to rehabilitate student loans:

After student loan rehabilitation, your loan is usually assigned or sold to a new servicer. All collection activities stop — though  only ends after you make five rehab payments — and you’ll regain access to federal student aid and repayment options, such as , and income-driven repayment.


Because you’re allowed to rehabilitate a student loan only once, have a strategy to afford your payments post-rehab. If you originally fell behind because payments were too expensive, selecting an will likely be your best choice. Your new servicer will give you this option when you restart repayment.

If your plan doesn't work and your rehabilitated loan defaults again, your only option will be to consolidate it out of default — assuming it's your first time consolidating that loan. If it's not, your remaining choices are to add another loan to the consolidation or pay your full balance.

If you reach that point, your loan holder may . Filing for could make sense as well. But neither of those options is guaranteed to save you money or get rid of your loans.

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