Getting Out of Default - Loan Rehabilitation Tab

Loan Rehabilitation

If you are in default on a Federal Family Education Loan (FFEL) being serviced by HESC, the Rehabilitation Loan Program gives you the opportunity to have your loans removed from default and repair your credit.

Benefits of loan rehabilitation include regained eligibility for benefits that were available on your loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, loan forgiveness, and eligibility for additional federal student aid.  Additionally, these negative consequences are removed:

  • Default status on your defaulted loan,
  • Default status reported to the national credit bureaus,
  • Wage garnishment, and
  • Any withholding of your income tax refund made by the Internal Revenue Service (IRS) or NYS Department of Taxation and Finance.

How student loan rehabilitation works:

  • You must make nine consecutive, voluntary, agreed-upon monthly payments that are received within a 10-month period. Money received by HESC from your tax refund or as garnished wages from your paycheck does not qualify as these payments are not voluntary.  NOTE: A good way to pay back your student loan is by enrolling in SMARTCHECK, our preauthorized electronic debit service.

  • Every monthly payment must be received within 20 days of the due date.

  • You must agree to pay a fee of up to 16% of the unpaid principal and accrued interest. These costs are added to your unpaid balance when the loan or loans are sold to the lender. This is a one-time fee to rehabilitate your loan but the collection costs that you may be paying now will be removed from your loan.

  • The Rehabilitation fee of 16% will not be added to the total unpaid principal and accrued interest on your loan(s) at the time of rehabilitation sale to the lender provided that you entered into a satisfactory repayment agreement agreeing to rehabilitate your loans within 60 days of HESC’s default loan purchase letter; and you sign, date and return the entire “Acknowledgment of Debt Agreement for Rehabilitation Loan Programs” agreement, and it is received by HESC within 60 days of the date reflected at the top of page one of the agreement. You must fulfill all of the terms of your repayment agreement including having made your first agreed upon monthly payment no later than 75 days after the date of the default loan purchase letter.
  • Once your loan is rehabilitated, you no longer make payments to HESC on your loan – HESC moves your loan back to a lender and you resume making payments on your loan to the lender.

  • All national credit agencies are notified that your loan is no longer in default, helping to repair your credit and, as a result, your overall credit score may improve.

For more information or to begin your loan rehabilitation, contact HESC at 1-866-991-HESC (4372) or This email address is being protected from spambots. You need JavaScript enabled to view it..