Reinstatement of Title IV and State Student Aid Eligibility
If a borrower defaults on their Federal Family Education Loan Program (FFELP) and/or Federal Direct Loan Program loan(s), the borrower may re-establish their eligibility for Federal Title IV student financial assistance funds and State ISAC-administered gift assistance programs. Eligibility will be reinstated when:
- the borrower makes six consecutive, voluntary, on-time, full monthly payments on the defaulted loan and continues the monthly payments to maintain eligibility; this is not automatic - the borrower must first request the reinstatement. A Reinstatement can only be granted once to a borrower. If it is granted and the borrower misses one monthly payment the borrower loses eligibility. - 682.200(b); 685.102
- the borrower's loan is rehabilitated by making 9 voluntary, full payments during a period of 10 consecutive months. The payments must be made within 20 days of the due date. A lump sum prepayment of future installments cannot be used to satisfy the consecutive months payment requirement. A lender must repurchase the loan for a rehabilitation to be complete.- 682.405; 685.211(f)
- the defaulted loan is paid in full through consolidation; or - 682.201(d)(1)(A)(3); 685.220(d)
- the borrower pays the defaulted loan in full.
The National Student Loan Data System (NSLDS) provides the status of a student’s loans. When NSLDS has information that shows the loan has been paid in full or paid in full by consolidation, a school does not need to contact ISAC for a reinstatement letter. If a school needs verification that a student has met the requirements for reinstatement of Title IV eligibility, the school should contact School Services at firstname.lastname@example.org to obtain a reinstatement letter.
Additional sources of information on reinstatement of eligibility for Title IV and ISAC gift assistance programs include:
- Federal Regulations – 34 CFR, Sections 668.35; 682.401(b)(4); 685.200(d); and
- ISAC Rules – Section 2700.40(a).
Fresh Start Initiative
In an August 17, 2022 DCL, the U.S. Department of Education (ED) announced that the “Fresh Start” initiative will enable borrowers with defaulted student loans to regain Title IV HEA student aid eligibility (Federal student loans, Federal Pell Grants and campus-based aid such as Federal Work-Study). The DCL contains guidance for schools to award aid to borrowers who qualify to have their eligibility restored through the initiative. Borrowers also have the chance to enroll in an income-driven repayment plan or other repayment option to resolve their default status. “Fresh Start” will remain available for one year after the end of the COVID-19 pandemic student loan payment pause (currently scheduled to end on December 31, 2022). ED will contact borrowers with instructions for participation. Borrowers who receive a fresh start for their federal program eligibility will also have eligibility for State ISAC-administered gift assistance programs reinstated.