Loan rehabilitation is a one-time "Get out of default" card. Here’s how it works:
The collection agency sets a monthly payment based on your income, minus any reasonable monthly expenses. The amount could be as low as $5 a month.
You’ll need to provide documentation, like copies of pay stubs and bills, and complete a detailed form to help determine the amount. Any wages garnished due to defaulted student loans will be considered among your expenses.
Make nine payments of the agreed-upon amount within 10 months and your loans move out of default. Any wage garnishment will stop. And you’re once again able to choose a repayment plan that works for you, including several income-based options that could drop your monthly payment to $0.
Once out of default, take care to stay out. Make your payments each month. Recertify your income every year if you’re on an income-based plan. And call your loan servicer if you run into trouble. If you default a second time, you’ll have fewer options.