Student Loan Rehabilitation Agreement

STUDENT LOAN REHABILITATION AGREEMENT

OVERVIEW

Loan rehabilitation is one method to remove your federal student loans from default. By making nine on-time, voluntary payments over a 10-month period, you can rehabilitate your defaulted loans and regain access to benefits such as income-driven repayment plans, deferment, forbearance, and additional federal student aid.

IMPORTANT UPDATE (May 2025): The federal government has restarted collections on defaulted federal student loans. Wage garnishment, tax refund seizure, and Social Security benefit offsets are now active. If you are in default, you should act quickly to begin rehabilitation or pursue other options.

SECTION 1: BORROWER INFORMATION

Full Legal Name: _______________________________________________

Former Names (if any): _______________________________________________

Date of Birth: _______________________________________________

Social Security Number: _______ - _______ - _______

Current Mailing Address:
_______________________________________________
_______________________________________________
City: _________________ State: _______ ZIP: ___________

Phone Number: _______________________________________________

Email Address: _______________________________________________

Federal Student Aid ID (FSA ID): _______________________________________________

SECTION 2: DEFAULTED LOAN INFORMATION

Current Loan Holder/Collection Agency:
☐ U.S. Department of Education Default Resolution Group (DRG)
☐ Maximus Federal Services
☐ Other: _______________________________________________

Account Number: _______________________________________________

Total Outstanding Balance (including principal, interest, and fees): $_______________

Date Loan(s) Entered Default: _______________________________________________

Loan Types in Default (Check all that apply):

☐ Direct Subsidized Loans
☐ Direct Unsubsidized Loans
☐ Direct PLUS Loans
☐ Direct Consolidation Loans
☐ FFEL Stafford Loans
☐ FFEL PLUS Loans
☐ FFEL Consolidation Loans
☐ Federal Perkins Loans

Current Collection Status:

☐ Wage garnishment active
☐ Tax refund offset (Treasury offset) active
☐ Social Security benefits being garnished
☐ No active collections
☐ Unknown

SECTION 3: REHABILITATION ELIGIBILITY REQUIREMENTS

Eligibility Checklist

To be eligible for loan rehabilitation, you must meet the following requirements:

☐ My loans are currently in default (more than 270 days past due for Direct/FFEL, 240 days for Perkins)

☐ I have NOT previously rehabilitated these same loans
- Note: Under the One Big Beautiful Bill Act (2025), borrowers with loans issued on or after July 1, 2027 may rehabilitate twice

☐ There is NO judgment against me for these loans
- If a court has issued a judgment, rehabilitation may not be available

☐ I am willing to make nine voluntary, on-time payments over a 10-month period

Fresh Start Program Status

Did you participate in the Fresh Start program before it ended on October 2, 2024?

☐ Yes - My loans were returned to good standing through Fresh Start
☐ No - I did not participate or missed the deadline
☐ I am unsure

Note: If you participated in Fresh Start, your loans should currently be in good standing. If they have since returned to default, you may be eligible for rehabilitation.

SECTION 4: INCOME AND EXPENSE INFORMATION

This information is used to calculate your reasonable and affordable monthly rehabilitation payment.

Employment Status

Current Employment Status:
☐ Employed Full-Time
☐ Employed Part-Time
☐ Self-Employed
☐ Unemployed
☐ Retired
☐ Disabled

Employer Name: _______________________________________________

Occupation: _______________________________________________

Monthly Income

Monthly Expenses

Calculated Discretionary Income

Total Monthly Income: $_______________
Minus Total Monthly Expenses: $_______________
Discretionary Income: $_______________

SECTION 5: PAYMENT CALCULATION

Standard Payment Formula

Under federal regulations, your rehabilitation payment is calculated as:

15% of Annual Discretionary Income / 12 = Monthly Payment

Annual Discretionary Income = (Annual Gross Income) - (150% of Poverty Guideline for your family size)

Current Poverty Guidelines (2026)

Note: Alaska and Hawaii have higher poverty guidelines

Your Family Size: _______________

Payment Calculation Worksheet

1. Annual Gross Income: $_______________
2. 150% of Poverty Guideline (from table): $_______________
3. Discretionary Income (Line 1 - Line 2): $_______________
4. Payment Amount (Line 3 x 0.15 / 12): $_______________

Alternative Payment Request

If you cannot afford the calculated payment amount, you may request an alternative payment based on your actual income and expenses.

☐ I accept the standard calculated payment amount of: $_______________

☐ I request an alternative payment amount based on my financial circumstances
- Requested payment amount: $_______________
- Reason for request: _______________________________________________

Minimum Payment: The minimum rehabilitation payment can be as low as $5 per month based on financial circumstances. Under the One Big Beautiful Bill Act, minimum payments for loans issued after July 1, 2027 will be at least $10.

SECTION 6: REHABILITATION PAYMENT AGREEMENT

Payment Terms

I agree to make the following payments:

Monthly Payment Amount: $_______________

Payment Due Date: _______ day of each month

Payment Schedule:

Payment Requirements

☐ I understand I must make 9 payments within a 10-month period
☐ I understand payments must be made within 20 days of the due date to qualify
☐ I understand payments must be voluntary (not from garnishment, offset, or other involuntary collections)
☐ I understand I may miss one payment within the 10-month period and still complete rehabilitation

Payment Method

☐ Automatic Bank Draft (ACH)
- Bank Name: _______________________________________________
- Routing Number: _______________________________________________
- Account Number: _______________________________________________
- Account Type: ☐ Checking ☐ Savings

☐ Check/Money Order

☐ Online Payment

☐ Phone Payment

Make payments payable to: _______________________________________________

Mail payments to: _______________________________________________

SECTION 7: EFFECTS OF REHABILITATION

During Rehabilitation

After making your first five consecutive payments, you may request:

☐ Suspension of wage garnishment
☐ Suspension of other collection activities
☐ The loan holder is required to stop garnishment after five payments under federal regulations, but may stop earlier

Note: Treasury offset (tax refund seizure) and Social Security garnishment may continue during rehabilitation until completion.

Upon Successful Completion

When you successfully complete rehabilitation:

☐ Your loan(s) will no longer be in default status
☐ Your loan(s) will be transferred to a regular loan servicer
☐ The record of default will be removed from your credit report
☐ You will regain eligibility for:
- Income-driven repayment plans
- Deferment and forbearance
- Additional federal student aid
- PSLF and other forgiveness programs

Note: While the default record is removed, late payment history before the default may remain on your credit report.

Loan Balance After Rehabilitation

Collection costs (up to 16% of outstanding principal and interest) may be added to your loan balance. This means your loan balance after rehabilitation may be higher than before default.

Current Principal: $_______________
Estimated Collection Costs: $_______________
Estimated Balance After Rehabilitation: $_______________

SECTION 8: ALTERNATIVE TO REHABILITATION - CONSOLIDATION

Instead of rehabilitation, you may choose to consolidate your defaulted loans into a new Direct Consolidation Loan.

Comparison: Rehabilitation vs. Consolidation

☐ I have considered consolidation but prefer rehabilitation because the default record will be removed from my credit report

☐ I would like more information about consolidation as an alternative

STATE-SPECIFIC NOTES

California (CA)

• California Franchise Tax Board may have separate collection actions
• California Department of Financial Protection and Innovation (DFPI) oversees loan servicers
• California residents have additional rights under the Student Borrower Bill of Rights
• Contact California Student Aid Commission for additional resources

Texas (TX)

• Texas does not have state income tax garnishment issues
• Texas Higher Education Coordinating Board provides resources
• Texas Workforce Commission may have records relevant to rehabilitation
• Contact Texas Attorney General for consumer protection assistance

Florida (FL)

• Florida has strong wage garnishment protections (head of household exemption)
• Florida Office of Financial Regulation oversees servicers
• No state income tax reduces some collection concerns
• Contact Florida Attorney General for assistance

New York (NY)

• New York has additional wage garnishment protections
• NY Student Loan Servicer Act provides extra borrower rights
• HESC may provide assistance for NY residents
• Contact NY Attorney General's Student Protection Unit

SECTION 9: BORROWER CERTIFICATION AND AGREEMENT

I, the undersigned borrower, certify and agree to the following:

Certifications:

☐ All information provided in this agreement is true, complete, and accurate to the best of my knowledge

☐ I understand that providing false information may result in penalties

☐ I authorize the loan holder to verify my income and expense information

☐ I understand that I may rehabilitate a defaulted loan only once (twice for loans issued after July 1, 2027)

Agreement:

☐ I agree to make 9 monthly payments in the amounts and on the dates specified in this agreement

☐ I understand that payments must be voluntary and made within 20 days of the due date

☐ I understand that involuntary payments (garnishment, offset) do not count toward rehabilitation

☐ I understand that failing to complete rehabilitation means my loans will remain in default

☐ I agree to notify my loan holder if my income or circumstances change significantly

☐ I understand that upon successful rehabilitation, my loans will be transferred to a regular servicer and I must continue making payments

☐ I understand that collection costs may be added to my loan balance

Borrower Signature: _______________________________________________

Date: _______________________________________________

Print Name: _______________________________________________

SECTION 10: LOAN HOLDER ACKNOWLEDGMENT

To be completed by loan holder/collection agency

Loan Holder Representative: _______________________________________________

Title: _______________________________________________

Date Agreement Received: _______________________________________________

Calculated Payment Amount: $_______________

☐ Standard calculation accepted
☐ Alternative payment amount approved: $_______________

First Payment Due Date: _______________________________________________

Expected Rehabilitation Completion Date: _______________________________________________

Loan Holder Signature: _______________________________________________

Date: _______________________________________________

CONTACT INFORMATION FOR LOAN HOLDERS

U.S. Department of Education Default Resolution Group (DRG)

• Phone: 1-800-621-3115
• TTY: 1-877-825-9923
• Website: myeddebt.ed.gov

Maximus Federal Services

• Phone: 1-800-621-3115
• Website: myeddebt.ed.gov

To Find Your Loan Holder:

1. Log in to StudentAid.gov
2. Check "My Loan Servicers" section
3. Or call Federal Student Aid: 1-800-433-3243

WHAT HAPPENS AFTER SIGNING

1. Receive Confirmation: Your loan holder will confirm receipt of your agreement and first payment due date

2. Make Payments: Make all 9 payments within 20 days of due dates

3. After 5 Payments: Request suspension of wage garnishment

4. Complete 9 Payments: Receive notification that rehabilitation is complete

5. Loan Transfer: Your loans will be assigned to a new servicer

6. Credit Report Update: The default record will be removed (may take 30-60 days)

7. Continue Payments: Begin repayment under a standard or income-driven plan with your new servicer

TRACKING YOUR PROGRESS

Payment Tracking Log:

Important: Keep records of all payments, including confirmations, bank statements, and any correspondence with your loan holder.

RESOURCES

• StudentAid.gov - Federal Student Aid information
• myeddebt.ed.gov - Default Resolution Group portal
• StudentLoanBorrowerAssistance.org - National Consumer Law Center
• CFPB.gov - Consumer Financial Protection Bureau
• Federal Student Aid Information Center - 1-800-433-3243

This template was last updated on 2026-01-25 and reflects current federal regulations including the resumption of collections in May 2025. Requirements may change. For the most current information, visit StudentAid.gov or contact your loan holder directly.