First of all, are you sure you lost your PELL eligibility? Usually it takes more than one semester to lose it. A first semester student who earns bad grades usually has a second semester to improve their grade point average. Check with the financial aid office at the school you attended to be sure about your PELL eligibility. If it was indeed lost, you should be able to regain it by petitioning to the school. Although every school is different, this usually means writing a statement explaining what happened the first time and telling them what has changed that it will be different the second time around. You may be given a probationary period to show that you can do college level work. And yes, you are correct. If you have a defaulted loan, you will not be eligible for state or federal financial aid. As there are numerous ways to get a student loan out of default, it is strange that the lender could not share with you the remedies for your defaulted loan, that could take as little as 3 months to 12 months. There is not enough room here to go into the remedies, so I suggest that you go to the financial aid office at your school. An advisor should be able to share with you the remedies and you can select the one that works best for you.