Student Loan rehabilitation is achieved by
making twelve consecutive, on-time monthly payments on a defaulted
Loan. Rehabilitation removes a loan from default. (A borrower may
eligibility for Title IV funds after six consecutive, on-time
monthly payments; however
the loan is still considered to be in default.) A borrower must make
a request to
Austin Peay State University (or its contracted collection agency)
in order to pursue
rehabilitation of a defaulted Perkins Loan.
payments are required. For example, a borrower
is not allowed to make six monthly double payments.
- The twelve
payments must be made monthly, even if the
borrower had been on a quarterly or semi-annual repayment plan
prior to defaulting.
- There can be
no gaps in the twelve payments. If a
borrower misses a payment, the "streak" is broken and the
borrower must begin
again in the attempt to make the twelve consecutive payments.
definition of "on-time" is at the discretion
of the school.
- The payment
amount is determined jointly by the school (or
its representative, i.e. collection agency) and the borrower.
There is no minimum payment
amount. This is true even if the borrower's promissory note
dictates a minimum
payment amount; the terms of the promissory note do not apply to
- A borrower
may rehabilitate a loan only once,
but there is not limit to the number of times a borrower may
attempt to make twelve
consecutive, on-time monthly payments.
Perkins Loan borrowers are eligible for
rehabilitation. This includes borrowers who have a judgment
rendered on their loan.
However, borrower payments on a loan on which a judgment has been
rendered must be
"voluntary." Any payments that are equal to the amount the borrower
required to make under the judgment are considered voluntary.
The benefits of
rehabilitation are the following:
of Title IV eligibility;
of the benefits and privileges of the promissory
note and a return to regular repayment status;
- a new
repayment period of up to ten years; and
- removal of
the default from the borrower's credit history.