General Rehabilitation Information
Student loan rehabilitation is a repayment program offered to borrowers who are now, or have been, in a delinquent loan repayment status. This includes borrowers who have submitted one or more past due payments, or whose loan account has entered a default status. To successfully rehabilitate your student loan will not only bring the loan account current, but will also repair your credit!
Student loan payment affects your personal credit rating just as credit card, mortgage, and/or car payments do: payments received late are reported as such to the three major credit bureaus. Because accurately reported Information is not negotiable, the late payment information reported may remain a permanent part of your credit history for up to ten years. Student loan rehabilitation is a way to earn the right to renegotiate your delinquent/defaulted student loan status.
How does it work?
The specifics are negotiated between the borrower and the lender, but the following terms are standard:
- The borrower must make (9) consecutive, on time, monthly payments.
- If the the expected payments are successfully made, the borrower regains financial aid eligibility.
- After the final payment has been received and processed, the lender will:
- Instruct the credit bureaus to remove all negative payment information previously reported;
- Have the borrower sign a new promissory note, allowing for an additional (9) years to repay the loan;
- Stop all collection activity;
- Allow access to all previously denied deferment, forbearance, and cancellation provisions.
Important: Federal Perkins and/or Stafford student loan debt may be cancelled (minimum guidelines apply). Please review the cancellation provision links below before making a decision to consolidate your
loan. You may lose all potential cancellation benefits if you consolidate. However, if you rehabilitate, all previously suspended cancellation benefits may be reinstated.
Cal Poly Student Loan Borrowers with Judgments
When loans become severely delinquent, Cal Poly may seek a judgment against the defaulted borrower in a court of law. If this occurs, the judgment becomes part of the affected borrower's personal credit report. A borrower in this situation may enter into a payment agreement with Cal Poly that includes the following terms:
- The borrower will be expected to pay the loan balance - including all applicable fees and interest - in full by making (9) consecutive, on-time monthly payments (cannot pay less, or more, than 9 payments);
- All payments must be received/processed by the billing service, ECSI, no earlier than 10 days before the established due date, and no later than 10 days after the established due date.
- After the successful processing of the 9th on-time payment , Cal Poly will -
- Instruct any credit bureau to which the default was reported to remove the default from the borrower's credit history; and
- Vacate the judgment.
To get more information please contact your Federal Perkins and/or Federal Stafford loan lender(s)/billing service(s) directly. To determine who your lenders are, please access the National Student Loan Data System (NSLDS).