Estimate the 15%-of-discretionary-income payment that gets a defaulted federal loan out of default
| AGI | Discretionary Income | Rehab Payment (15% ÷ 12) | Total, 9 Payments |
|---|---|---|---|
| $20,000 | $0 | $5.00 (minimum) | $45 |
| $30,000 | $6,060 | $75.75 | $681.75 |
| $42,000 | $18,060 | $225.75 | $2,031.75 |
| $50,000 | $26,060 | $325.75 | $2,931.75 |
| $75,000 | $51,060 | $638.25 | $5,744.25 |
A family of four protects $49,500 of income (150% of the 2026 guideline), so the same $42,000 AGI drops to the $5 minimum. That's the power of family size in this formula.
| Family Size | 48 States & DC | Alaska | Hawaii |
|---|---|---|---|
| 1 | $23,940 | $29,925 | $27,540 |
| 2 | $32,460 | $40,575 | $37,338 |
| 3 | $40,980 | $51,225 | $47,136 |
| 4 | $49,500 | $61,875 | $56,934 |
| 6 | $66,540 | $83,175 | $76,530 |
| 8 | $83,580 | $104,475 | $96,126 |
Source: 2026 HHS poverty guidelines (base $15,960 + $5,680 per additional person in the 48 states; Alaska and Hawaii apply statutory 1.25× and 1.15× factors). Subtract the figure for your family size from AGI; whatever remains is your discretionary income. Add $8,520 per person beyond 8 in the 48 states.
Federal loan rehabilitation is the 9-payments-in-10-months path out of default. Agree to a "reasonable and affordable" payment with your loan holder, make nine voluntary on-time payments, and the default comes off your credit report while the loan returns to a servicer in good standing. This calculator estimates the payment the loan holder will open with.
Discretionary income = AGI − 150% of the poverty guideline for your family size and state. Rehab payment = the greater of $5 or 15% of discretionary income ÷ 12. That's the same skeleton as the old IBR formula, applied to a defaulted balance. The poverty figures here are the 2026 HHS guidelines.
Enter your AGI from your last tax return (or current pay if income dropped sharply — you can document that instead), pick your family size, and choose your state group. The result is the standard-agreement opening number, not a ceiling: if it doesn't fit your budget, you can document your actual expenses and negotiate lower, down to the $5 floor.
A single borrower in Ohio with $42,000 of AGI: the 2026 guideline for a family of one is $15,960, so 150% is $23,940. Discretionary income is $42,000 − $23,940 = $18,060. Fifteen percent of that is $2,709 a year, or $225.75 a month. Nine payments total $2,031.75, after which the default notation is removed, wage garnishment and tax-offset collection stop, and the loan moves back to a servicer. The same borrower with one dependent (family of two) protects $32,460 instead, dropping discretionary income to $9,540 and the payment to $119.25.
Two follow-ups matter. First, rehabilitation is once per loan, so if the loan re-defaults you'll be consolidating or paying instead. Second, payments made in default don't earn PSLF or IDR credit — after rehabilitating, enroll in a qualifying plan immediately so month one starts counting. The student loan payoff calculator shows what the post-rehab balance looks like on a real schedule.
Education only, not legal or financial advice. Your loan holder's agreement governs; verify payment terms with your servicer or holder before paying.
Nine qualifying monthly payments within a 10-month window. Payments must be voluntary, on time, and in the agreed amount. Once the ninth lands, the loan is out of default, the default notation comes off your credit report, and the loan returns to a servicer. Late or missed payments reset the count, and rehabilitation can only be used once per loan.
The standard rehabilitation agreement sets your payment at 15% of your annual discretionary income, divided by 12. Discretionary income is your adjusted gross income minus 150% of the federal poverty guideline for your family size and state. The payment can never be less than $5 a month. At $42,000 AGI and a family of one in the 48 contiguous states, that works out to $225.75 a month.
You can negotiate. The formula number is the opening offer, not a take-it-or-leave-it figure. If your actual income and necessary expenses support a lower amount, provide documentation (pay stubs, rent, utilities, child care, medical costs) and the loan holder must consider a reasonable alternative payment, which can be as low as $5. Always get the agreed amount in writing before paying.
Yes, the default status is removed once the loan rehabilitates, and administrative wage garnishment and tax refund offsets tied to the default stop. But the late payments that led to default stay on your history for up to seven years, so rehabilitation is a reset of status, not an eraser of the past.
No. Each loan gets one rehabilitation. If a rehabilitated loan defaults again, the remaining path is consolidating it back into good standing (with income-driven repayment) or paying it off. Payments made while in default do not count toward PSLF or IDR forgiveness either, so after rehabilitating, get onto a qualifying repayment plan quickly.
They solve the same problem differently. Consolidation is faster (about 3 qualifying payments or enrollment in IDR), but the default stays on your credit for its normal seven-year life. Rehabilitation takes 9 payments but deletes the default notation. If you plan to apply for a mortgage soon, rehabilitation is usually worth the extra months; otherwise consolidation is quicker.