[Code of Federal Regulations]

[Title 34, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 34CFR674.39]



[Page 586-587]

 

                           TITLE 34--EDUCATION

 

 CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION

 

PART 674_FEDERAL PERKINS LOAN PROGRAM--Table of Contents

 

                        Subpart B_Terms of Loans

 

Sec. 674.39  Loan rehabilitation.



    (a) Each institution must establish a loan rehabilitation program 

for all borrowers for the purpose of rehabilitating defaulted loans made 

under this part, except for loans for which a judgment has been secured. 

The institution's loan rehabilitation program must provide that--

    (1) A defaulted borrower is notified of the option and consequences 

of rehabilitating a loan; and

    (2) A loan is rehabilitated if the borrower makes an on-time, 

monthly payment, as determined by the institution, each month for twelve 

consecutive months and the borrower requests rehabilitation.

    (b) Within 30 days of receiving the borrower's last on-time, 

consecutive, monthly payment, the institution must--

    (1) Return the borrower to regular repayment status;

    (2) Treat the first payment made under the 12 consecutive payments 

as the first payment under the 10-year repayment maximum; and

    (3) Instruct any credit bureau to which the default was reported to 

remove the default from the borrower's credit history.

    (c) Collection costs on a rehabilitated loan--

    (1) If charged to the borrower, may not exceed 24 percent of the 

unpaid principal and accrued interest as of the date following 

application of the twelfth payment;

    (2) That exceed the amounts specified in paragraph (c)(1) of this 

section, may be charged to an institution's Fund until July 1, 2002 in 

accordance with Sec. 674.47(e)(5); and

    (3) Are not restricted to 24 percent in the event the borrower 

defaults on the rehabilitated loan.

    (d) After rehabilitating a defaulted loan and returning to regular 

repayment status, the borrower regains the balance of the benefits and 

privileges of the promissory note as applied prior to the borrower's 

default on the loan. Nothing in this paragraph prohibits an institution 

from offering the borrower flexible repayment options following the 

borrower's return to regular repayment status on a rehabilitated loan.



[[Page 587]]



    (e) The borrower may rehabilitate a defaulted loan only one time.



(Approved by the Office of Management and Budget under control number 

1845-0023)



[64 FR 58311, Oct. 28, 1999, as amended at 65 FR 65614, Nov. 1, 2000; 67 

FR 67077, Nov. 1, 2002]