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| Reinstatement of Eligibility After Default |
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| If a borrower and guaranty agency reach a compromise agreement to settle the debt for less than the total amount due, the borrower may be eligible for additional federal student aid once the compromised amount of the debt is paid. If the borrower chooses to reaffirm his or her defaulted loan obligation and makes satisfactory payment arrangements to repay the debt (six on-time, reasonable, and affordable consecutive voluntary monthly payments), he or she may regain eligibility for SFA funds. A student who resolves a default by consolidating a defaulted FFEL also regains eligibility once the defaulted loan has been paid in full by the Consolidation Loan or
Direct Consolidation Loan.
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| A guaranty agency must inform a defaulted borrower who has made six payments as described above of the possibility of loan rehabilitation (after the borrower makes six more payments).
Reinstatement of eligibility does not bring a loan out of default, and the borrower is not eligible for deferment.
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| If a student regains eligibility during an enrollment period (if the sixth payment under a satisfactory repayment arrangement is made after the start of an enrollment period, for example), the student regains eligibility for the entire academic year in which he or she regained eligibility status. |
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| If a borrower has made satisfactory repayment arrangements to repay a defaulted loan, his or her SAR will indicate that the borrower is eligible but will include a warning that if scheduled payments are not made on the loan, future federal student aid will be denied. The financial aid administrator may reconcile the SAR with official paperwork from the lender stating that the default has been satisfied. This documentation must be kept in the student's file. The financial
aid administrator may then determine the student's eligibility for a loan.
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