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Loan Rehabilitation

The U.S. Department of Education requires that all Perkins lenders establish a loan rehabilitation program for borrowers with defaulted Perkins Loans.

The Perkins Loan Rehabilitation program allows defaulted borrowers to regain many important benefits of the promissory note, which are lost if their loan defaults.

These benefits include:

  • The right to apply for periods of repayment deferment
  • The right to apply for cancellation benefits for service rendered
  • Continued eligibility for additional Title IV aid

Benefits for a rehabilitated borrower include:

  • The Perkins Loan will be returned to a current status and will no longer be considered delinquent.
  • All historical information regarding the defaulted loan will be removed from credit bureau files.
  • The borrower will receive a maximum of 10 years (including the rehabilitation period) to complete repayment of the debt.
  • The rights and responsibilities of the existing promissory note will be reinstated.
  • Eligibility for Title IV student financial assistance will be reinstated.
  • Transcripts will again become available to the student.

Rehabilitation requirements:

  • The borrower must request Perkins Loan rehabilitation from the school.
  • The borrower must negotiate a reasonable monthly payment amount with the school and make nine (9) consecutive, on-time monthly payments (for the agreed-upon amount).
  • The loan is not considered rehabilitated until the receipt of the ninth (9th) consecutive, on-time monthly payment.
  • To meet the criteria of on-time payments, your payment must be received no more than 20 days prior or 20 days after your payment due date.
  • Any missed payment during the nine (9) month rehabilitation period will immediately cancel the rehabilitation agreement.
  • Payments may not be made in advance for future monthly payments.
  • One payment must be made each of the nine (9) consecutive months in the rehabilitation period. Multiple payments received in one month will count as a single rehabilitation payment for the month.

While a borrower can attempt to rehabilitate a defaulted loan more than once, a borrower may receive only one rehabilitation per loan. A subsequent default on a successfully rehabilitated loan cannot be "cured" by a second rehabilitation period.

Borrowers should contact their lending institution if they are interested in rehabilitating their defaulted Perkins loans.

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