Student loan rehabilitation is a one-shot opportunity that allows borrowers to get federal student loans out of default by making monthly payments. The collection agency handling your loans initially calculates your monthly payments using the adjusted gross income and dependents listed on your tax return.
If you can’t afford that amount, you can ask for a reasonable and affordable payment amount. At that point, the creditor will ask for your monthly income and expenses and family size to get a monthly payment as low as $5. The company will also ask you to sign and submit OMB No. 1845-0120: Loan Rehabilitation Income and Expense Information form.
Here’s what you need to know about completing that form.
The Loan Rehabilitation Income and Expense Information form is a document used to help federal student loan borrowers with defaulted loans (FFEL Loans and Direct Loans) get a reasonable and affordable monthly payment.
Initially, the collection agency or loan holder sets the amount of your monthly payment for the Loan Rehabilitation Program at 15% of your annual discretionary income, divided by 12. They’ll calculate your discretionary income for the loan rehabilitation program by:
If you can’t afford that amount, you can ask for a lower payment. The debt collector will then ask you questions about your monthly income and expenses, where you live, and your family size. It will use that information to complete the Loan Rehabilitation Income and Expense Information form. (The form used to be called the Financial Disclosure for Reasonable and Affordable Rehabilitation Payments)
The form is approved by the Office of Management and Budget and assigned a control number (in this case, OMB Control Number 1845-0120). Any form approved by the OMB must be reviewed at least every three years. The current form expires on June 30, 2023.
