What is Loan Rehabilitation?

Loan rehabilitation is a payment process that allows you to establish a regular payment history and move your loan out of default status. If you have a defaulted loan under the Missouri Student Loan Program and you are interested in rehabilitation, please contact the collection agency assigned to your account. Effective August 14, 2008, federal student loans in default can only be rehabilitated once.


To be eligible for loan rehabilitation, you must:

  • Sign and return a Rehabilitation Agreement.

  • Make at least nine satisfactory payments within 20 days of your payment due date.

  • Return supporting documentation of your total financial circumstances as requested.

After you have made the required payments and returned the completed agreement, the MDHE will attempt to sell your loan to an eligible lender.


Note: You must continue making satisfactory payments to the MDHE or the collection agency until you are notified that your loan(s) has been sold. Your monthly payment may change once your loan has been purchased by the new lender.


Successful loan rehabilitation of your defaulted student loan will result in the following:

  • The MDHE will remove the default status on your MDHE-guaranteed loan.

  • The MDHE will advise the national credit bureaus to delete its negative entry from your credit report.

  • Collection costs will be reduced to 16 percent before being capitalized (added to the principle balance) at the time your loan is sold to a new lender.

  • Your eligibility for deferment or forbearance will be renewed.

  • Additional repayment plans will be available once your account is out of default status.
  • Your eligibility for new federal financial aid, such as Pell grants or new federal student loans, will be reinstated.