Resolving a Loan Default

Federal Requirements for Default Resolution

Federal regulations prohibit the awarding of additional federal student aid (FSA) to students who have defaulted on a federal student loan. However, a student can regain eligibility for FSA by resolving the default status.

The U.S. Department of Education has established the following three methods to resolve a default status:

  • Repayment in full (including consolidation) - A student can resolve a default by repaying the loan in full
  • Satisfactory repayment arrangements - A student in default on an FSA loan can regain eligibility after making six consecutive, full, on- time, voluntary payments under a repayment arrangement that is satisfactory to the loan holder. A student may regain eligibility under this option only one time
  • Loan rehabilitation - Although a student can regain eligibility for all FSA funds by making satisfactory repayment arrangements, the loan is still in default. After the student makes nine full, voluntary payments on time (no later than 20 days after the due date) within 10 consecutive months, the loan becomes eligible for rehabilitation.

After a default status has been resolved, sufficient documentation must be sent to the school indicating the student has regained federal aid eligibility. Per federal regulations, the documentation must be from the entity that reported the default to NSLDS; clearly show that each defaulted loan has been resolved; be provided in writing on the entity’s letterhead (or other format that ensures its origin) and dated.

Additional information can be found at the U.S. Department of Education’s Federal Student Aid website:

FREE Financial Literacy Class at Liberty University:

Our office is once again offering an exciting financial literacy course that is available to every student.  The course is provided by the University in collaboration with The Lampo Group, Inc., founded by Dave Ramsey.  FNLT 101 is available at no cost, but enrollment is limited.  Below are highlights and insights about this wonderful opportunity.

  • FNLT 101 is self-paced and divided into five modules: Introduction to Financial Literacy: Properties of Money and Wealth, Saving, Budgeting, Debt, and College Essentials and Career Planning.
  • The course utilizes the Foundations of Personal Finance: College Edition materials by Dave Ramsey.
  • FNLT for the 1516 year will be divided into separate fall and spring course sections with spots for 2,500 students each.
  • Fall section opens 9/2/2015 and closes 1/15/2016.
  • Spring section opens 1/18/2016 and closes 5/31/2016.
  • Enrollment is voluntary and limited to 5,000 students
  • The course will be available in BlackBoard as FNLT1516:[Section Number] approximately 1-3 business days after registration.
  • The Financial Literacy Course Registration Form is available in ASIST. To learn how to complete an electronic form in ASIST, click here.
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  • The short, 20-question final exam requires a grade of 80% or higher to be considered as completed successfully. The exam can be reset an unlimited amount of times by the course instructor.
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Links to additional resources