If you are currently in default, there are two programs to help get you out and back into repayment: Loan Rehabilitation and Consolidation.
To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either
- agree to repay the new Direct Consolidation Loan under an Income Driven Repayment (IDR) plan or
- make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.
There are special considerations if you want to re-consolidate an existing Direct Consolidation Loan or Federal (FFEL) Consolidation Loan that is in default:
- To re-consolidate a defaulted Direct Consolidation Loan, you must also include at least one other eligible loan in the consolidation in addition to meeting one of the two requirements described above. If you have no other eligible loans that can be included in the consolidation, you cannot get out of default by consolidating a defaulted Direct Consolidation Loan. Your options are repayment in full or loan rehabilitation.
- You may re-consolidate a defaulted FFEL Consolidation Loan without including any additional loans in the consolidation, but only if you agree to repay the new Direct Consolidation Loan under an income-driven repayment plan. If you include at least one other eligible loan in the consolidation, you’re eligible to re-consolidate a defaulted FFEL Consolidation Loan if you meet either of the two requirements described above.
After your defaulted loan has been consolidated, your Direct Consolidation Loan will be eligible for benefits such as deferment, forbearance, and loan forgiveness. You’ll also be eligible to receive additional federal student aid, but unlike loan rehabilitation, consolidation of a defaulted loan does not remove the record of the default from your credit history.
Note, if you are in wage garnishment, you will first have to get the judgment or court order lifted before you can consolidate.
You can read more about default here: https://bysavi.zendesk.com/hc/en-us/articles/115005092894-I-am-nearing-in-default-on-my-student-loans-What-are-my-options