Perkins Loan Rehabilitation

Okay, it happened. You defaulted on your Perkins Loan. (See our article on Perkins Loan Default.) It’s not a great situation but you can still recover. Both your lending school and the federal government are interested in encouraging you to become and remain a good borrower. As a result, you have the opportunity to participate in Perkins Loan Rehabilitation.

Perkins Loan rehabilitation requires you to enter into a written payment agreement, and make 12 consecutive, voluntary, on time monthly payments in an amount determined by your agreement. The rules for payback during this twelve month time period must be carefully followed.

  • Twelve payments are required, e.g., a borrower can’t make six monthly double payments.
  • Even if you had been making quarterly or semi-annual payments prior to defaulting, payments during the rehabilitation period must be made monthly,
  • You cannot miss a payment. If you do, the schedule has been broken and you must begin the twelve payment cycle again
  • You can rehabilitate a loan only once, but there is no limit on the number of times you can attempt to make twelve consecutive, on-time monthly payments.

Once you have rehabilitated your loan, the loan is removed from default. (You can regain eligibility for Title IV funds after six consecutive, on-time monthly payments; however the loan is still considered to be in default.)

The penalties for Perkins Loan default are severe. (See our related article on Perkins Loan Default.) The benefits of loan rehabilitation make it well worth it.

  • You are eligible for Title IV fund again;
  • You can return to regular repayment status and take advantage of deferment, forbearance or cancellation, in appropriate;
  • You gain a new repayment period of up to ten years
  • The default is removed from your credit history.

What’s even better than Perkins Loan rehabilitation? Paying on time so you never default and need to go through rehabilitation.