FAQ

WHAT DOES DEFAULT MEAN?

Default on a Federal Family Education Loan Program (FFELP) loan occurs when you fail to make payments and your loan reaches 270 days of delinquency (late or past due). When your Federal student loan becomes 270 days past due, the lender of your loans submits a claim to the guarantor (PHEAA) to purchase the loans.

WHAT SHOULD I DO IF MY STUDENT LOAN DEFAULTS?

Contact us immediately at 1-800-233-0751 to find out what repayment options are available and to avoid additional consequences.

HOW DO I CONTACT PHEAA?

Contact us to find out what repayment options are available and to avoid additional consequences.

WHAT ARE MY REPAYMENT OPTIONS?
  • Paying the loan in full—This is your best option. We allow you up to 75 days from the date of default to pay off the defaulted loan balance without any consequences, such as negative credit reporting or collection fees that may have been assessed while your loan is in default.
  • Monthly payments—We will offer monthly payments if you cannot make the full defaulted balance. You may qualify to participate in the Loan Rehabilitation Program by making monthly payments on time.
Is PHEAA part of the U.S. Department of Education (ED)?

We are not part of ED; however, we are affiliated with and administer some of the federally regulated programs that ED provides.

WHAT IS THE DEFAULT LOAN REHABILITATION PROGRAM?

The Loan Rehabilitation Program offers a defaulted borrower the opportunity to return their loans to good standing. Upon completing the Loan Rehabilitation Program, you may be eligible for applicable deferments, forbearances, and repayment options. In order to successfully complete the Loan Rehabilitation Program, you must adhere to the requirements listed below:

  • You are required to make nine qualifying monthly payments within a 10-month period. A qualifying payment is:
    • A payment that is made voluntary: Payments received through garnishment or federal offset do not qualify
    • A payment that is received on-time: On-time is within 20 days of the due date for the payment

    • The full amount required: You cannot pay a lump sum amount or make double payments to qualify sooner in the 10-month period

      NOTE: Qualifying payments are how you demonstrate your ability to make monthly payments after the default status has been removed from your loan.

  • You must make your entire monthly payment on-time each month until you receive your Rehabilitation Approval Notice. Contact us immediately if you have any questions regarding whether or not you should make a payment.
  • You must have a minimum principal and interest balance of $50 at the time of rehabilitation (after you make your nine qualifying payments).

NOTE: Successful completion of the rehabilitation program requires that PHEAA have a lender available to purchase your loans. If we cannot secure a lender, payments must continue to be made to maintain eligibility until such time as a lender is available to complete the rehabilitation.

Also, any loans previously rehabilitated on or after August 14, 2008, do not qualify for this program.

HOW DO I QUALIFY FOR THE DEFAULT LOAN REHABILITATION PROGRAM?

To obtain information concerning the Default Loan Rehabilitation Program and determine if you qualify, please contact us directly at 1-800-233-0751. Our office hours are Monday through Friday, 8:00 AM to 5:00 PM (ET). When contacting us, please have your most recent federal tax return available, if possible; your required payment for this program will be calculated based upon your Adjusted Gross Income (AGI) and family size or the completion of a Financial Disclosure Form.

If you completed the Default Loan Rehabilitation Program during the student loan payment pause initiated by ED, you may be eligible to complete this program a second time. Please contact us at 1-800-233-0751 to learn more about your eligibility for this program.

WHAT ARE THE BENEFITS OF THE DEFAULT LOAN REHABILITATION PROGRAM?

After successfully completing the Default Loan Rehabilitation Program:

  • We will request that the consumer reporting agencies remove any negative credit reporting for your loan while it was in default. However, negative information reported by your loan servicer prior to default will not be removed as a result of rehabilitation.
  • You may be eligible for applicable deferments, forbearances and repayment options.
  • You will regain eligibility for future federal financial aid.

NOTE: You may only complete the Default Loan Rehabilitation Program one time unless you previously completed this program during the student loan payment pause initiated by ED. Please contact us at 1-800-233-0751 to learn more about your eligibility for this program.

WHAT IF I PREVIOUSLY COMPLETED THE DEFAULT LOAN REHABILITATION PROGRAM, BUT I DEFAULTED ON MY LOANS AGAIN?

Unfortunately, you are not eligible for the Default Loan Rehabilitation Program a second time unless you previously completed the program during the student loan payment pause initiated by ED. Please contact us at 1-800-233-0751 to learn more about your eligibility for this program.

WHAT CONSEQUENCES CAN OCCUR AS A RESULT OF NON-PAYMENT?

If payments are not made timely on your defaulted student loan, your guarantor has the right to enact various nonpayment consequences against you.

  • Administrative Wage Garnishment Process—The administrative wage garnishment process allows your guarantor to garnish up to 15% of your take home pay as a means of recouping the outstanding balance of your loans. Your guarantor will notify you, via mail at your last known address, at least 30 days prior to initiating administrative wage garnishment proceedings. Upon receipt of this notice, you have certain rights in accordance with federal laws.

    If you want to establish a payment plan to avoid wage garnishment or have questions about it, please contact us immediately at 1-800-233-0751.

  • Federal Treasury Offset Program—The Federal Treasury Offset Program allows your guarantor to seize federal monies you may have access to, such as tax returns, Social Security benefit payments, and travel reimbursements. These assets can be used to help repay your defaulted student loan debt.

    If you want to establish a payment plan to avoid the Federal Tax Offset Program or have questions about it, please contact us immediately at 1-800-233-0751.

  • The assignment of your loan to third-party Collection Vendors—Your guarantor has the option of assigning collection for your loan to a third-party collection vendor for assistance in recouping the defaulted loan balance.
  • The assignment of your loan to ED—If your loan is considered uncollectible, meaning that payments have not been made, your guarantor may permanently assign your loan to ED for additional collection actions at the federal level. To avoid this, contact us immediately at 1-800-233-0751 to establish a satisfactory repayment arrangement.
HOW DO I MAKE A PAYMENT?

We offer several convenient ways for you to make a payment:

  • Direct Debit: We offer free automatic deduction of your monthly payment from your checking or savings account. This repayment option allows you the freedom to choose how often your monthly payment is withdrawn (weekly, biweekly, etc.). To apply for Direct Debit, please complete, sign and return the Default Collections Agreement.
  • Automated Clearing House (ACH) Debits: This option allows you to authorize a one-time payment from your checking or savings account.
  • Debit Card: You may authorize a single debit card payment for your account.

    NOTE: We do not accept credit cards as a form of payment.

  • Mail: Mail your check or money order to:

    PHEAA
    P.O. Box 1375
    Buffalo, NY 14240-1375

    Please include your account number on all payments made through the mail. After we receive your first payment, we will send you monthly billing statements if we have a valid mailing address on file.

HOW IS MY PAYMENT APPLIED TO MY DEFAULTED BALANCE?

We apply your payment in this order:

  1. Outstanding charges, such as returned check fees
  2. Legal costs
  3. Collection fees that may have been assessed
  4. Interest
  5. Principal
Can PHEAA take my tax return?

Yes. If your account is certified for the Federal Treasury Offset Program any federal funds you may receive may be intercepted or seized. Federal funds could include, but are not limited to: Tax returns, Social Security benefit payments, federal pensions, travel reimbursements, Supplemental Security income, etc. This consequence can occur as early as 75 days into default.

Contact us to get more information on how to avoid or inactivate this certification.

Can PHEAA garnish my wages?

Yes. Wage garnishment can occur as early as 75 days into default. If you do not begin to make voluntary payments by the date included in your 30 Day Prior to Wage Withholding Notice letter or email, your employer can be notified to begin involuntarily withholding up to 15% of your take home pay. Any garnishment payments received will be applied to the defaulted loan.

Contact us so one of our loan counselors can help you avoid or educate you on how we can remove wage garnishment.

Can PHEAA send me to an outside collection vendor?

Yes. PHEAA uses a series of outside collection vendors when you do not make voluntary payments. Once the account is with an outside collection agency, you must make all payment arrangements with them.

Collection Vendor Phone Number
Radius Global Solutions 1-877-752-9142
GC Services 1-866-841-9469
Transworld Systems, Inc (TSI) 1-866-744-1169
WHAT IF MY ACCOUNT IS ALREADY ASSIGNED TO AN OUTSIDE COLLECTION VENDOR?

If you know the name of the collection vendor handling your loan, contact them immediately and they will work with you to establish a satisfactory repayment arrangement. If you do not know the name of the collection vendor that is handling your loan, please contact our office at 1-800-233-0751 to obtain this information.

Collection Vendor Phone Number
Radius Global Solutions 1-877-752-9142
GC Services 1-866-841-9469
Transworld Systems, Inc. (TSI) 1-866-744-1169
WHAT IS THE DIRECT CONSOLIDATION LOAN PROGRAM?

This is a program offered by the ED that allows you to combine all of your eligible federal student loans into a single Direct Consolidation Loan.

Some of the advantages of consolidation include:

  • The removal of your loans from a defaulted status
  • Reinstatement of your eligibility for future federal financial aid
  • Eligibility for applicable deferments, forbearances and repayment options

NOTE: Consolidation does not result in the removal of any negative credit reporting for your loan while it was in default or for information that may have been reported by your loan servicer prior to default.

If you are interested in this program, please visit StudentAid.gov to get more information or contact the ED at 1-800-557-7394.

Will consolidating my loans get me out of default?

Contact us to discuss your options.

What information should I have ready when completing my consolidation application?

You should have the following information with you when applying for consolidation:

  • Demographic information for two references who do not live with you and who you have known for at least 5 years
  • Your driver's license number (if applicable)
  • Copy of your most recently filed tax return
  • Proof of your household monthly income
Can I get financial aid while in default?

Yes. After you make six on-time qualifying monthly payments, you may be eligible to receive additional Title IV financial aid.

ARE THERE BENEFITS FOR SERVICE MEMBERS?

The Servicemembers Civil Relief Act (SCRA) is intended to grant servicemembers temporary relief from judicial and administrative proceedings and transactions. The SCRA limits the interest rate on a servicemember's eligible loans to a maximum of 6% while they are performing qualifying active-duty military service. For the purposes of the SCRA, "interest" includes any other charges or fees applied to the loan. This benefit will not raise a servicemember's rate to 6% if it is already below 6%; instead, it provides a maximum rate. To obtain more information, please contact our office at 1-800-233-0751 or visit MilitaryOneSource.mil.