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Student Loans


Loan Rehabilitation

Per the Higher Education Amendments of 1998, 34 C.F.R. Section 674.39 "Loan Rehabilitation" as amended in the Federal Register of October 28, 1999, as amended in the Federal Register of October 28,2009, the Secretary of Education has amended federal regulation authorizing lending institutions of Federal Perkins Loan monies to remove borrowers who are behind in their repayment of their Federal Perkins Loan from default status upon completion of a loan rehabilitation agreement. A loan is considered in default when a payment is late.

In order for a Perkins loan to be rehabilitated, the borrower agrees to repay his/her Federal Perkins Loan by making nine consecutive on-time monthly payments. Each monthly payment (determined by the university) shall be paid by the 1st of each month. The first payment made under the nine consecutive payments will be treated as the first payment under a new repayment period of up to 10 years.

Once the loan has been rehabilitated (after the 9th consecutive on-time monthly payment has been made), the borrower is subject to the terms, conditions, benefits, and privileges of the original promissory note. This includes regaining eligibility for the balance on deferment, forbearance and cancellation. Once the loan has been rehabilitated, the Borrower's loan is brought current and is no longer considered to be in default and the rehabilitation will be reported to the credit reporting agency. Borrower is also subject to the same responsibilities under the note, which includes, but are not limited to, making regular monthly payments and informing Auburn University of any address change. In addition, once the loan has been rehabilitated, Borrower regains eligibility for Title IV student financial assistance, as long as the Borrower is otherwise eligible.

A borrower interested in Loan Rehabilitation should contact the Student Loan Department manager, Julie Trussell, in order to notify the department of their intent.

Benefits of Successful Loan Rehabilitation

  • Request is sent to credit bureau to remove default from credit history
  • Loan is returned to regular repayment status
  • Borrower regains balance of privileges of promissory note as applied prior to default
  • Collection costs are capped at 24% (unless borrower re-defaults)
  • Borrower re-establishes Title IV student financial assistance eligibility
How To Apply
  • Borrowers must request loan rehabilitation
  • Call or send written request
  • A loan rehabilitation agreement must be negotiated, approved and executed before the loan can be rehabilitated



Student Financial Services · Mary Martin Hall
Auburn University · Alabama 36849 USA