Perkins Loan Rehabilitation

Federal Perkins Student Loan rehabilitation is achieved by making nine consecutive, on-time monthly payments on a defaulted Perkins Loan. Rehabilitation removes a loan from default. (A borrower may regain 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 The University of Texas at Austin (or its contracted collection agencies) in order to pursue rehabilitation of a defaulted Perkins Loan.

  • The nine 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 nine payments. If a borrower misses a payment, the "streak" is broken and the borrower must begin again in the attempt to make the nine consecutive on-time monthly payments. Nor can two payments made in the same month be considered for different months.
  • The 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.
  • Rehabilitation is a one-time opportunity. If you rehabilitate a defaulted loan and then default on that loan again, you cannot rehabilitate it a second time.
  • Borrowers who have a judgment rendered on their defaulted Perkins Loan are not eligible for rehabilitation.

The benefits of rehabilitation are the following:

  • restoration of Title IV eligibility;
  • restoration of benefits and privileges of the promissory note and a return to regular repayment status;
  • a new repayment period of up to 9.25 years; and
  • removal of the default from the borrower's credit history.