These include deferment, forbearance, cancellation, and affordable repayment rights.Federal Consolidation Loans for Borrowers in Default As of July 1, 2010, the Direct Loan consolidation program is the only government consolidation loan program.It’s important that you fully understand loan rehabilitation and loan consolidation before making your decision.Learn more about loan rehabilitation and loan consolidation.Unless you make three voluntary, on-time, full monthly payments on a defaulted loan before you consolidate it, your choice of repayment plans for the new will be limited to one of the income-driven repayment plans.If you make three voluntary, on-time, full monthly payments before consolidating, you can choose from any of the repayment plans available to Direct Consolidation Loan borrowers. One option for getting your loan out of default is loan rehabilitation.The term “default” is sometimes unclear to student loan borrowers.
Each option has its pros and cons, but either choice will set you on the right track to getting out of default and improving your financial situation.
Consolidation to get out of default works well for many borrowers with defaulted loans.
After obtaining a consolidation loan, you get a fresh start, becoming eligible for new loans, grants, and even deferments.
A student loan borrower is considered to be delinquent the day after she misses a scheduled loan payment.
As long as the borrower makes the payment as soon as she can or contacts her loan servicer to discuss her options, a delinquency will not necessarily hurt her standing or finances.