Part 7—New Rules for Deferment, Forbearance, and Loan Rehabilitation

Life happens. Whether it is a job loss, illness, or unexpected expenses, sometimes borrowers need a break from student loan payments. In this post, we will explore how the new federal legislation changes the rules around deferment, forbearance, and loan rehabilitation—the tools borrowers use when they are struggling.

Deferment for Economic Hardship or Unemployment Eliminated

• No more deferments for economic hardship or unemployment for loans originating after July 1, 2027.

• Borrowers will need to rely on the Repayment Assistance Plan (RAP) instead, which adjusts payments based on income.

This means even if you lose your job, you will still be expected to make a minimum payment (as low as $10) under RAP.

Forbearance is Now Limited

Forbearance is still available—but under new rules:

• For loans originated on or after July 1, 2027

• You can only use up to 9 months of forbearance in any 24-month period.

This is intended to prevent borrowers from pausing payments indefinitely and accumulating interest.

Loan Rehabilitation: Now You Get a Second Chance

Previously, you could only rehabilitate a defaulted federal loan once. That meant if you fell behind a second time, loan rehabilitation was not an option anymore.

New Rule (Effective July 1, 2027):

• You can rehabilitate your loan twice. This gives borrowers more flexibility and forgiveness when life throws curveballs.

• The minimum monthly payments for a rehabilitated loan will be $10.

Why it matters:

For borrowers who are trying to rebuild credit or regain federal aid eligibility, this second chance is a lifeline. And for low-income borrowers, the $10 minimum provides predictability and a baseline for budgeting.

What This Means for You

These changes are aimed at creating a more structured repayment system, one that encourages progress while still offering flexibility during tough times. While the elimination of traditional deferment and tighter limits on forbearance may seem strict, the new Repayment Assistance Plan (RAP) and second-chance loan rehabilitation offer borrowers more realistic pathways to stay on track and avoid default.

As always, planning ahead is your best defense. Understanding how these changes impact future borrowing can help families and students make informed decisions now—especially as you think about how to pay for college without overborrowing. Contact us today to guide you through the college planning journey.

In our next blog, we will shift gears from borrowing to breaking down the updates to college savings plans.