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: http://www2.ed.gov/offices/OSFAP/DCS/index.html

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 fifteen modules based on the topics of Properties of Money and Wealth, Saving, Budgeting, Debt, College Essentials, and Career Planning.
  • The course utilizes the Foundations of Personal Finance: College Edition materials by Dave Ramsey.
  • There is NO enrollment charge.
  • Enrollment is voluntary
  • The course will be available in BlackBoard as FNLT1617:[SectionNumber] 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.
  • The course includes a pre-test, quizzes, discussion boards, a 2-3 page paper assignment, and a final exam.
  • The course requires a grade of 700 (70%) or higher to be considered successfully completed. The quizzes and final exam can be reset an unlimited number of times by the course instructor if a re-attempt needs to be made.
  • Once successfully completed with a passing grade, undergraduate students may email their certificates of completion to the PLA (Prior Learning Assessment) processor for one credit hour.
  • For information on Dave Ramsey and Foundations U, click here.
  • Step-by-Step Navigation Guide for FNLT 101

Links to additional resources