Consolidating federal student loans lower interest

Once you have made the required nine payments, your loans will no longer be in default.

To rehabilitate a defaulted Federal Perkins Loan, you must make a full monthly payment each month, within 20 days of the due date, for nine consecutive months.

To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either In addition, if you want to consolidate a defaulted loan that is being collected through garnishment of your wages, or that is being collected in accordance with a court order after a judgment was obtained against you, you cannot consolidate the loan unless the wage garnishment order has been lifted or the judgment has been vacated.

If you choose to repay the new Direct Consolidation Loan under an income-driven plan, you must select one of the available income-driven repayment plans at the time you apply for the consolidation loan and provide documentation of your income.

While loan rehabilitation takes several months to complete, you can quickly apply for loan consolidation.

However, loan rehabilitation provides certain benefits that are not available through loan consolidation.

Your loan holder may be collecting payments on your defaulted loan through wage garnishment or Treasury offset (taking all or part of your tax refunds or other government payments).

When your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset will stop.

You’ll regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness, and you’ll be eligible to receive federal student aid.

Also, the record of default on the rehabilitated loan will be removed from your credit history.

However, your credit history will still show late payments that were reported by your loan holder before the loan went into default.

Consolidating federal student loans lower interest