PHEAA Helps Thousands of Defaulted Student Loan Borrowers "Rehabilitate" Their Federal Loans Into Good Standing

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Saves billions of dollars for taxpayers

Harrisburg, PA (April 2, 2013)—The Pennsylvania Higher Education Assistance Agency (PHEAA) announced today that it has helped more than 145 thousand defaulted student loan borrowers successfully rehabilitate $2.3 billion in federal student loans. The agency has been helping borrowers restore defaulted loans and their credit ratings to good standing since the federal Student Loan Rehabilitation Program was created by Congress through the Higher Education Act in 1995.

During the last fiscal year alone, July 2011 to June 2012, PHEAA rehabilitated nearly $450 million in defaulted student loans for more than 18,800 borrowers. Additionally, the agency assisted more than one million at-risk borrowers in escaping delinquency and avoiding default, which protected the borrower's financial standing while saving tax dollars.

"As more borrowers are struggling under the weight of increasing student loan debt, it is critically important for us to work with them long before they experience financial difficulties," said Representative William Adolph, PHEAA Board Chairman. "Ultimately, it is our goal to help borrowers avoid default. But, for those who do default, we provide further services to help them get their loan payments back on track."

PHEAA's proactive default aversion initiatives includes highly-trained debt management professionals, state-of-the-art technology and nationally-recognized resources, such as

The consequences of defaulting on a student loan can be serious and long-lasting. A defaulted loan can negatively affect the borrower's credit report, which could stand in the way of qualifying for further student aid, block the purchase of a car or home, and burden the borrower with high interest rates in the future.

In accordance with federal regulations, successful completion of the Defaulted Loan Rehabilitation Program will remove the default status completely from a PHEAA-guaranteed loan account. Any negative record of the default is removed from the borrower's credit report, the borrower is eligible for additional student aid, and the rehabilitated loan becomes eligible for applicable deferments.

A rehabilitated student loan also saves taxpayer dollars, since federally-gauranteed loans are insured against default by the federal government.

"There are many reasons why a borrower falls into default status on their student loan," acknowledged Senator Wayne D. Fontana, Vice Chairman of the PHEAA Board. "But the only way to return that defaulted loan to good standing is to participate in a loan rehabilitation program."

In order to participate in PHEAA's Defaulted Loan Rehabilitation Program, the defaulted borrower must establish eligibility by making nine satisfactory payments on the loan within a 10-month period.

Borrowers who are currently in default status may contact a qualified customer service representative at 1-800-233-0751 or visit for more information.

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