Can You Rehabilitate a Student Loan Twice?

Short answer: starting July 1, 2027, yes. Before then, no. The 2025 budget law (the One Big Beautiful Bill Act, which the Education Department calls the Working Families Tax Cuts Act) changes the old once-per-loan limit to twice. But the change takes effect July 1, 2027. Today, if you've already rehabilitated a loan and it defaulted again, rehabilitation isn't open to you on that loan. Consolidation is the main way out.

Last updated: October 28, 2026. Checked against the statute text (Sec. 82003), 34 CFR 682.405, 685.211 and 685.220, the May 1, 2026 final rule, and ED's January 16, 2026 release.

What the law actually changed

Rehabilitation is the "nine payments in ten months" program for defaulted federal loans. When you finish it, the loan goes back to good standing with a regular servicer, and the default notation comes off your credit report.

Since 2008, the rule has been one rehabilitation per loan. The regulation for FFEL loans, 34 CFR 682.405, now reads that a loan can be rehabilitated only once between August 14, 2008 and June 30, 2027, and that a second rehabilitation is allowed for loans after that. For Direct Loans, 34 CFR 685.211(f)(12) says the same thing in two parts: a loan rehabilitated before July 1, 2027 can't be rehabilitated again before that date, and from July 1, 2027 the limit is two.

Sec. 82003 of the budget law made two changes that matter here:

1. Two rehabilitations instead of one, from July 1, 2027.
2. A $10 minimum monthly rehabilitation payment for Direct Loans from July 1, 2027. The statute ties it to Direct Loans made on or after that date. ED's regulation, 34 CFR 685.211(f)(1)(i), applies the $10 floor to Direct Loan rehabilitation from July 1, 2027. FFEL loans keep the existing $5 minimum.

The Education Department's January 16, 2026 press release mentioned the "second opportunity to rehabilitate" along with RAP as part of why it was delaying involuntary collections. That's a description of the law, not a sign that it starts early. The May 1, 2026 final rule says it plainly: a borrower "cannot begin that second rehabilitation until on or after" July 1, 2027.

Two more details from that rule help. An attempt that doesn't finish doesn't use up a rehabilitation; only a completed one counts toward the limit. And the Fresh Start program didn't count as a rehabilitation, so if Fresh Start is how you left default, it doesn't use one up.

Who this is for: people who completed rehabilitation once, usually years ago, and then defaulted again. That group is bigger than you might expect, because rehabilitation drops people into regular repayment without much support.

The timing problem

Here's the awkward part. Collections might restart before second rehabilitation opens.

• Wage garnishment and Treasury offsets have been on hold since January 16, 2026, with no end date.
• A Washington Sun report on October 19, 2026, citing anonymous sources, said some people in the administration want garnishment back for the 2027 tax season. That report hasn't been confirmed by ED or Treasury. See where the collections pause stands.
• Second rehabilitation opens July 1, 2027, after that tax season.

So a borrower who waits for July 2027 could lose a tax refund in early 2027 if offsets come back. That's possible, not certain. It's the main reason to look at consolidation now rather than waiting.

How the rehabilitation payment is figured (worked examples)

Which formula applies depends on who holds the defaulted loan.

• Direct Loans (held by ED). Under 34 CFR 685.211(f)(1), as amended by the May 1, 2026 final rule, ED starts from the payment you'd owe under any income-driven plan you're eligible for. The floor is $5 a month, or $10 starting July 1, 2027.
• FFEL loans held by a guaranty agency. 34 CFR 682.405 still uses the older formula: 15% of your adjusted gross income above 150% of the federal poverty guideline, divided by 12, with a $5 minimum.

Either way, if the amount doesn't work for you, you can object. The loan holder then recalculates it from your income, family size and necessary expenses such as housing, food, utilities, medical costs, child care and transportation.

The same rule lets ED offer a single application for rehabilitation and an income-driven plan. With your approval, ED can use the income-driven figure as your rehabilitation payment. A Direct Loan rehabilitated on or after July 1, 2026 through that single application can then move straight into the income-driven plan you chose (34 CFR 685.211(f)(14)). We couldn't confirm from StudentAid.gov whether the combined application is available for every loan yet, so ask your loan holder when you apply.

The examples below are hypothetical and use the 2026 poverty guidelines.

Borrower C: single, AGI $36,000.

• 150% of poverty for one person: $23,940.
• $36,000 − $23,940 = $12,060.
• 15% × $12,060 = $1,809 a year ÷ 12 = about $151 a month (the older FFEL formula).
• Direct Loan, using RAP as the income-driven plan: AGI between $30,001 and $40,000 is 3%. 3% × $36,000 = $1,080 ÷ 12 = $90 a month.

Borrower D: household of three, AGI $36,000.

• 150% of poverty for three: $40,980.
• $36,000 is below that, so the FFEL formula gives $0, and the payment would be the $5 minimum.
• Direct Loan, using RAP: $90 − (2 dependents × $50) = −$10, so RAP's own $10 minimum applies. From July 1, 2027, $10 is also the Direct Loan rehabilitation floor.

Borrower E: single, AGI $62,000.

• $62,000 − $23,940 = $38,060 × 15% = $5,709 ÷ 12 = about $476 a month.
• Direct Loan, using RAP: AGI between $60,001 and $70,000 is 6%. 6% × $62,000 = $3,720 ÷ 12 = $310 a month.

Two things stand out. Low-income households often get a very small rehabilitation payment. And for middle incomes, the income-driven figure can be noticeably lower than the old formula.

Your options today, if you've already used rehabilitation once

1. Consolidation (available now). A Direct Consolidation Loan pays off the defaulted loan and creates a new one in good standing.

• To consolidate a defaulted loan, you generally either agree to repay under an income-driven plan or make three voluntary, on-time monthly payments first.
• A consolidation made after July 1, 2026 is a new loan. Under the current StudentAid.gov eligibility chart, its plans are RAP or Tiered Standard.
• The default notation from before stays on your credit report. Consolidation clears the default status but doesn't remove the record.
• If the defaulted loan is already a consolidation loan, 34 CFR 685.220(d)(2) limits what you can do. A Direct Consolidation Loan generally can't be reconsolidated by itself; at least one other eligible loan has to be included. A defaulted FFEL Consolidation Loan is the exception: it can be reconsolidated on its own to get an income-driven plan (IBR or ICR before July 1, 2028, and RAP from that date).
• A loan under a wage garnishment order can't be consolidated until the order is lifted (34 CFR 685.220(d)(1)). With garnishment paused right now, this isn't in the way, but it could be if collections restart.
• Our guide on how to get student loans out of default compares the two paths side by side.

2. Pay in full or set up a voluntary agreement. Rarely realistic, but voluntary payments do reduce the balance and interest.

3. Wait for July 1, 2027. This is reasonable only if consolidation doesn't fit (for example, because of the reconsolidation limits) and you can handle the risk of a possible 2027 tax refund offset.

The Defaulted Loans Support Center, launched by Treasury and ED on September 30, 2026, is the online portal for default options. Treasury says it supports online rehabilitation and consolidation applications and e-signatures.

Why people default a second time, and how to avoid it

Practitioners see the same patterns over and over:

• The payment jumped after rehab. Rehabilitation payments are based on income, but once the loan goes back to a servicer, it moves into a regular plan. People who didn't pick an income-driven plan right away found their bills going from $5 to a few hundred dollars.
• Mail went to an old address. After rehabilitation, the loan moves to a new servicer (Aidvantage, CRI, Edfinancial, MOHELA or Nelnet). Notices from the new servicer go unread.
• Recertification was missed. On an income-driven plan, missing the annual income update can bump the payment back up. Our IDR recertification deadline page covers how that works.
• Autopay wasn't set up again. Autopay with the default collector doesn't carry over to the new servicer.

If you rehabilitate again in 2027, plan the handoff: choose a repayment plan as soon as the servicer has the loan, set up autopay, and put the recertification date in your calendar.

Questions people commonly ask

• "I rehabilitated in 2015 and defaulted in 2023. Can I start now and finish after July 2027?" Don't plan on it. The final rule says a second rehabilitation can't begin before July 1, 2027, and ED declined to add rules for payments that straddle that date. Expect to start a new nine-payment agreement on or after July 1, 2027.
• "Do collection costs get added?" Collection costs can be added to defaulted loans. How much depends on the loan type and the path out, so ask the loan holder for the payoff and the costs in writing.
• "Will rehab stop a garnishment that's already started?" Garnishment can be suspended after five rehabilitation payments. With garnishment on hold right now, this matters most if collections restart.
• "Does rehabilitation count toward PSLF?" The rehabilitation payments themselves generally don't count as PSLF qualifying payments. After rehab, payments on a qualifying plan with a qualifying employer can count. See the PSLF hub.

Common mistakes

• Treating "second rehabilitation" as available today. It isn't until July 1, 2027.
• Starting voluntary payments and assuming they count. Before July 1, 2027 they can't be part of a second rehabilitation. Ask in writing whether any payment is part of a rehabilitation agreement.
• Missing a payment during the nine. You can miss one of ten months, not two. A late payment that falls outside the window doesn't count.
• Agreeing to an amount you can't keep up. If the offered payment is too high, ask for the income-and-expenses alternative or the IDR-based figure.

Related reading: how to get student loans out of default, student loan wage garnishment, and the student loan default hub.

Frequently asked questions