Default Rehabilitation Calculator
The defaulted loan, and what you earn
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the defaulted balance, including any interest already added to it. The example uses $28,000.
- 02
Enter the collection costs your servicer or the collection agency has added, as a percent of the balance. Read this off your account rather than guessing; the example leaves it at zero. The FFEL ceiling at 34 CFR 682.405 is 16%, which gives a sense of the plausible range.
- 03
Enter your adjusted gross income and your family size. These drive the payment, because for a Direct Loan the rehabilitation amount is based on income and not on what you owe. The example uses $34,000 and a family of two. Enter your section 152 dependents separately, remembering that a spouse is not a dependent: that count prices only the RAP payment you would return to afterwards, not the rehabilitation payment itself.
- 04
Enter the interest rate on the defaulted loan so the page can price the consolidation alternative alongside rehabilitation.
- 05
Read the rehabilitation payment at the top, then the total across the required nine payments, the FFEL formula shown for contrast, and the insights on what rehabilitation removes from your credit report and how consolidating out of default compares.
Formula
For a DIRECT loan (34 CFR 685.211(f)(1)(i)): Discretionary income = adjusted gross income minus 150% of the poverty guideline for your family size. Rehabilitation payment = the payment required under an eligible income-driven plan, modelled here as the plan percentage x discretionary income / 12, with a floor of $5 a month before 1 July 2027 and $10 on and after it. The regulation adds that a reasonable and affordable amount may NOT be a required minimum such as $50 if a smaller amount is affordable, may NOT be a percentage of the total loan balance, and may NOT rest on criteria unrelated to your total financial circumstances. For an older FFEL loan held by a guaranty agency (34 CFR 682.405(b)(1)(iii)): Payment = 15% x (adjusted gross income minus 150% of the poverty guideline) / 12, floored at $5. Rehabilitation completes on 9 voluntary payments, each within 20 days of its due date, across 10 consecutive months. Garnishment may continue until 5 qualifying payments are made. Poverty guideline = the one-person figure plus an amount per additional person. HHS 2026 for the 48 contiguous states and DC: $15,960 plus $5,680 each.
Example
A borrower has $28,000 in default at 6.54%, with no collection costs added, an adjusted gross income of $34,000 and a family of two. The 2026 poverty guideline for a family of two is $21,640, so 150% of it is $32,460, leaving $1,540 of discretionary income. Ten percent of that over twelve months gives a rehabilitation payment of $12.83 a month, which is above the $5 floor. Nine payments come to $115.50 in total, made within ten consecutive months. The FFEL formula on the same numbers would have asked $19.25 a month. The defaulted balance of $28,000 plays no part in either calculation. Once the loan is rehabilitated and back in normal repayment, the same borrower — a couple claiming no section 152 dependents — would face a RAP payment of about $85.00 a month. Consolidating out of default instead would produce a loan of roughly $244.53 a month over fifteen years, and would leave the default on the credit report where rehabilitation would have had it removed. Wage garnishment, if any is running, could continue until the fifth qualifying payment.
Definitions
- Default
- The status a federal student loan reaches after a long period of non-payment. The whole balance becomes due, collection begins, eligibility for further federal aid stops, and the government may garnish wages administratively and offset tax refunds.
- Reasonable and affordable payment
- The rehabilitation payment amount, determined from the borrower's total financial circumstances. For a Direct Loan the Department starts from the payment an eligible income-driven plan would require, and the regulation forbids basing it on a percentage of the balance.
- Voluntary payment
- A payment the borrower makes themselves. Money taken by wage garnishment or tax refund offset is not voluntary and does not count toward the nine payments rehabilitation requires.
- Collection costs
- Charges added to a defaulted balance by the party collecting it. Read the actual figure from your account rather than assuming one; the FFEL ceiling at 34 CFR 682.405 is 16% of unpaid principal and accrued interest at sale or assignment.
- Administrative wage garnishment
- The federal government's power to take a share of a defaulted borrower's wages without a court order. It may continue until five qualifying payments have been made under a rehabilitation agreement.
Good to know
What default costs, and how rehabilitation ends it
A federal student loan in default is a different kind of problem from a loan that is merely behind. The entire balance becomes due at once, collection activity begins, and the government has powers no ordinary creditor holds: it can garnish wages administratively without going to court, offset tax refunds and some federal benefit payments, and it can do so indefinitely, since federal student debt has no statute of limitations. Eligibility for further federal student aid stops, which matters greatly to anyone hoping to return to study. And the default is reported to the credit bureaus, where it does severe and lasting damage. Rehabilitation is the route out that is designed to undo the most of that. Under 34 CFR 685.211(f) a defaulted Direct Loan is rehabilitated when the borrower makes nine voluntary, reasonable and affordable monthly payments, each within twenty days of its due date, during ten consecutive months. The ten-month window is deliberately larger than the nine payments required, which allows for one missed month without starting over, but every payment that does count must arrive within that twenty-day margin. A late payment does not count, and the arithmetic is unforgiving on that point. The word voluntary carries weight too. Money taken from you by administrative wage garnishment or a tax refund offset is not voluntary, and it does not count toward the nine. A borrower whose wages are already being garnished must therefore make the rehabilitation payments in addition to what is being taken. The regulation limits that overlap: garnishment continues until five qualifying payments have been made under the rehabilitation agreement, after which it stops. Budgeting for a few months of paying both is the single most common practical difficulty with rehabilitation, and knowing about it in advance is worth more than any other piece of preparation. Your servicer or the collection agency handling the loan can tell you exactly where your account stands.
How the payment is worked out for a Direct Loan
There is a widely repeated formula for the rehabilitation payment that does not apply to most borrowers, and it is worth being precise about which rule governs your loan. The figure quoted almost everywhere is 15% of the amount by which your adjusted gross income exceeds 150% of the poverty guideline, divided by twelve. That formula is real, but it lives at 34 CFR 682.405, which governs FFEL loans held by a guaranty agency. FFEL was the old bank-based lending programme, and it stopped making new loans in 2010. For a Direct Loan, which is what almost every borrower who has studied this century holds, the rule is at 34 CFR 685.211(f)(1)(i) and it is different. The Secretary initially treats your reasonable and affordable payment as the amount you would owe under any eligible income-driven repayment plan, subject to a floor. The floor is $5 a month before 1 July 2027 and $10 a month on and after that date, so a page like this one that will be read across the change has to show both. The same regulation states explicitly what the payment is not: it may not be a percentage of your total loan balance, and it may not be based on criteria unrelated to your total financial circumstances. The example illustrates how much turns on this. A borrower with $34,000 of income and a family of two has a poverty guideline of $21,640, so 150% of it is $32,460, leaving $1,540 of discretionary income. Ten percent of that over twelve months is $12.83 a month, which is the Direct Loan figure. The FFEL formula on the same numbers would give $19.25. The defaulted balance of $28,000 does not enter either calculation. If the amount you are offered still seems impossible, the regulation gives you the right to object and ask for it to be recalculated on your actual income and expenses, and the written agreement must tell you how.
The credit report, and the one thing rehabilitation removes
The strongest argument for rehabilitation over every other route out of default is written into the regulation. Under 34 CFR 685.211(f)(8), when a defaulted loan is rehabilitated the Secretary instructs any consumer reporting agency to which the default was reported to remove the default from the borrower's credit history. Not mark it satisfied, not annotate it: remove it. No other exit from default does this. Consolidating out of default leaves the default record in place, and it stays there for years. It is important to be exact about what disappears, because the promise is narrower than people hope. The default itself comes off. The record of the late payments that preceded the default does not. A borrower who missed payments for nine months before the loan was declared in default will still have those delinquencies reported, and they continue to affect a credit score until they age off in the normal way. Rehabilitation removes the single most damaging item, which is a substantial benefit, and it does not restore your file to the state it was in before the trouble began. Alongside the credit entry, rehabilitation restores eligibility for federal student aid, ends collection activity and returns the loan to normal repayment, where an income-driven plan can then be applied. The limits on how often you may do this have recently changed and the date matters. Under the regulation, a loan rehabilitated before 1 July 2027 cannot be rehabilitated a second time if it falls back into default. For rehabilitations on and after 1 July 2027 the limit becomes twice per loan. Two categories of loan cannot be rehabilitated at all: a loan on which a judgment has been obtained, and a loan obtained by fraud where the borrower has been convicted of or pleaded to that fraud. For most borrowers the practical reading is that this is a single opportunity, and the nine payments deserve to be treated accordingly.
Rehabilitation against consolidating out of default
There are two ways out of a defaulted federal student loan and they suit different circumstances, so the choice deserves a few minutes rather than a default assumption. Rehabilitation takes at least ten months, requires nine on-time voluntary payments, and removes the default from your credit report. Consolidation can be arranged in weeks, requires either three consecutive voluntary payments or agreement to repay the new loan on an income-driven plan, and leaves the default on your credit report where it will remain for years. The example gives a sense of the financial shape. The rehabilitation payment is $12.83 a month, so the whole course of nine payments costs $115.50. Consolidating the same $28,000 balance instead produces a loan of roughly $244.53 a month over fifteen years. Those numbers are not really comparable, because one is a temporary arrangement to cure a default and the other is the ongoing repayment of the debt, but they show that rehabilitation asks very little of a low-income borrower in the short term. After rehabilitation the loan returns to normal repayment, where the same borrower, claiming no section 152 dependents, would face a RAP payment of about $85.00 a month. Speed is the deciding factor for many people. If you need your federal aid eligibility restored in time to enrol for a term that begins next month, ten months of rehabilitation payments will not get you there and consolidation will. If your wages are being garnished and you need that to stop quickly, consolidation resolves the default faster, though rehabilitation stops garnishment after five qualifying payments. If neither clock is pressing, rehabilitation is generally the better outcome, because the credit report benefit is real and permanent and it is available only once. One thing to watch in either route is collection costs, which can be added to the balance. Read what your account actually shows rather than assuming a figure, and ask the holder of the loan to itemise them before you agree to anything.
Frequently asked questions
How many payments does rehabilitation take?
Nine. Under 34 CFR 685.211(f) a defaulted Direct Loan is rehabilitated when the borrower makes nine voluntary, reasonable and affordable monthly payments, each within twenty days of its due date, during ten consecutive months. The ten-month window allows for one missed month, but every payment that counts must arrive within that twenty-day margin.
How is the payment worked out?
For a Direct Loan, the Secretary initially treats your reasonable and affordable payment as the amount you would owe under any eligible income-driven repayment plan, with a floor of $5 a month before 1 July 2027 and $10 on and after that date. The regulation states explicitly that the amount may not be a percentage of your total loan balance. In the example, $34,000 of income against a family-of-two guideline of $21,640 leaves $1,540 of discretionary income, giving $12.83 a month.
Is it not 15% of discretionary income?
That formula is real but it is the FFEL rule at 34 CFR 682.405, used by a guaranty agency on an older bank-held loan, not the Direct Loan rule. On the example's numbers it would give $19.25 a month instead of $12.83. Almost everyone who has studied this century holds Direct Loans, so ask who holds your loan before assuming which rule applies.
What does rehabilitation actually remove from my credit report?
The default itself, and only that. Under 34 CFR 685.211(f)(8) the Secretary must instruct every consumer reporting agency the default was reported to to remove it from your credit history. The record of late payments that preceded the default stays, and continues to affect your score until it ages off normally. No other route out of default removes the default entry.
Can I rehabilitate a loan more than once?
Under the regulation, a loan rehabilitated before 1 July 2027 cannot be rehabilitated again if it returns to default. For rehabilitations on and after 1 July 2027 the limit becomes twice per loan. A loan under judgment cannot be rehabilitated at all, and neither can one obtained by a fraud the borrower was convicted of. For most borrowers this is best treated as a single opportunity.
Will my wages stop being garnished straight away?
No. The regulation allows administrative wage garnishment to continue until you have made five qualifying payments under the rehabilitation agreement, so expect a few months of paying both. Money taken by garnishment is not voluntary and does not count toward the nine payments, which is the most common practical difficulty with rehabilitation.
Should I rehabilitate or consolidate out of default?
Rehabilitation takes at least ten months and removes the default from your credit report. Consolidation can be done in weeks and leaves the default on file. In the example, rehabilitation costs $115.50 across nine payments, while consolidating the same balance produces a loan of about $244.53 a month over fifteen years. If no clock is pressing, rehabilitation is generally the better outcome; if you need aid eligibility restored for a term starting next month, consolidation is the only route that is fast enough.