PHEAA Won’t Get His Student Loans Out of Default – Erin


Dear Steve,

Married to man who defaulted on student loan with PHEAA. Past failed attempt at rehabbing loan. We spoke to PHEAA when they were garnishing his wages and had taken his tax refund (before we were married).

Arranged an increased payment direct deposit to stop the wage garnishment and tax return taking, were told it would also take him out of default. Two years later, no missed payments, loan still listed on credit report as in Default.

PHEAA refuses to change status or provide alternate solution.

What can we do to get my husbands loan out of default status? He has paid religiously for over 2 years, no missed payments and the loan is larger than ever (60K+). It is stopping us from qualifying for a mortgage and buying a house.

The only thing PHEAA will say is to pay it off (cause we have that money in our pocket right?) Please tell me there is a way to get the loan out of default and towards paying it off.

Additionally my husband works in public service and should qualify for loan forgiveness if not for the default status 🙁 Please help!



Dear Erin,

I’m so glad you contacted me. There is so much here that needs fixing ASAP.

I have no idea what payment program PHEAA has your husband on. There are a couple of possibilities.

First, it might just be that the additional payment he made did not remedy the default and is just keeping him out of full default but the loan is not actually current. Or it might be that the loan is now current but the delinquent history is still being reported.

I’m not sure why the rehab attempt failed but that would have been the best approach to getting the wage garnishment stopped and then after nine payments the loan would be out of default.

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Unless the loan is out of default it can’t be enrolled into a qualifying Public Service forgiveness repayment plan.

So my biggest concern here is it is very possible that none of his student loan payments he has made might count towards loan forgiveness.

Under the Public Service Loan Forgiveness program he must be on a qualifying repayment program. That would require his loans to be under a Direct Consolidation Loan and he can opt for an income driven repayment plan that can lower the payment by income.

Payments made while not on this program, don’t count towards forgiveness. And he will need 120 on-time, full qualifying payments to have his loans forgiven.

The issue with the tax refund intercept is easy to resolve. Just don’t get a tax refund. Adjust your withholdings so you get more each month and avoid a refund to intercept. If you do that then you never need to worry about a refund intercept in the future.


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6 thoughts on “PHEAA Won’t Get His Student Loans Out of Default – Erin”

  1. Hi, I have 9000 dollars in student loans with PHEAA. I have decided to pay the debt in full due to not knowing if I will have a job in the next 9 months that it takes to do a rehabilitation program. PHEAA is stating if I pay in full the default will stay on my credit for 7 yrs. Is this true? Also Im purchasing a home, if I pay in full but it remains in default with a 0 balance will that stop me from purchasing?

  2. Thank you for your quick reply! You had mentioned rehabilitation, but we are out of chances to rehabilitate. You are saying, if it is paid off, it will still show defaulted on the history?
    Have you ever heard of the payments still reporting monthly “Failure to Pay” on all accounts when we have been paying steadily for years? Is it possible that what we pay is not enough, or is it showing FTP because it will always show failure to pay until it is paid off because they are in default?

    Very grateful for your advice and sharing of knowledge!

    • “Failure to pay” is a broad description. More information would be needed to get to the bottom of it. Here is one scenario I’ve seen before. Let’s say 12 months are missed. The payment is finally sent but is credited back towards the oldest missed payment. That payment is no longer due for month 1 but since it was credited for the oldest missed it is not credited to the month it was sent. So you would technically still be reported delinquent.

      The absolute best thing you can do is ask the servicer for a statement on all the loans to help explain the current status. We need facts over guesses.

  3. Hello! We are in the exact same situation, except that my husbands loan amounts are much less and we may be able to pay them off.
    My big question is, if we pay them off, can we – or how do we- have the defaulted reports removed? We have been paying steadily again for over two years (after a failed rehabilitation attempt-same situation as your original poster) but when we just checked the credit report, every month still shows FP (failure to pay)
    This was upsetting because I thought we were in repayment all this time.
    I’m guessing this just means it’s going to continue like that until it’s paid off?
    Any suggestions on having this removed?
    He has four student loans and they have showed up first as AES FROM 2011-2014, then as PHEAA from 2015-2019. So it looks like eight different accounts with blemishes. It’s really hurting our chances at getting a home loan. Please help!

    • If you do pay them your credit reports should reflect a true and accurate reporting of your credit history, including any defaults.

      If you are currently making payments and it is still reporting as delinquent then they may not have reaged the account when payments started being made again and each payment you are making now is being applied first to the oldest delinquent account.

      Even in rehabilitation, the old defaulted payments will show. According to the Department of Education, “If you rehabilitate a defaulted loan, the record of the default will be removed from your credit history. However, your credit history will still show late payments that were reported by your loan holder before the loan went into default. “


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