Students who have defaulted their Stafford federal loans will be able to take advantage of a special loan pay-off program, a University official said.

The U.S. Department of Education program provides a six-month, one-time opportunity to repay defaulted loans without penalties, said Robert Evans, assistant vice-president of student financial aid.

Penalties such as late fees and administrative costs can sometimes equal as much as 35 percent of a student's loan, according to a document issued by the U.S. Department of Education.

Students who repay their loans during the amnesty period will restore their credit and regain eligibility for federal financial aid.

"If a student was asking us for advice, we would tell them it is to their advantage to repay the loan," Evans said.

To be eligible for the program, a student must have one or more Stafford federal loans, formerly Guaranteed Student Loan, in default as of Dec. 19, 1989.

Students should contact their guarantee agency and arrange for payment in full by Aug. 31, according to the document.

The Pennsylvania Higher Education Assistance Agency is the state's main guarantee agency.

The program will probably not have a significant effect on the collection rates for PHEAA's loans because defaulters will probably be unable to come up with the money in one large sum, said Sally Stroup, staff attorney for PHEAA.

"Maybe some people who have defaulted can come up with the money. This may be the incentive," Stroup said.

Some people may be able to borrow money from their families, Stroup said. In general, however, she does not expect the number of defaulters to suddenly drop during the pay-off period.

"If there's anybody who wants to pay in full, we'll be happy to take their check," Stroup said.

The default rate of Pennsylvania students is 4 percent, which Stroup said she considers very low. That means 96 percent of all borrowers in the state make their monthly payments, she added.

The University's default rate is 3.1 percent, down from 4.8 percent in fiscal year 1986, Evans said.

The Education Department instituted the special grace period program as a result of the congressional passage of the Omnibus Reconciliation Act in December. This is the same act responsible for budget cuts to such student aid programs as the Student Educational Opportunity Grant, the Perkins Loan program and the College Work-Study program.

"It's a congressional action," Evans said. "The Department of Education is simply enforcing the law."