Through a Direct Consolidation Loan, you can pay off your outstanding balances and have a new loan with one monthly payment and a fixed interest rate.
In order to use this option, borrowers need to meet certain initial qualifying criteria and do one of two things with respect to their defaulted loans: With a Direct Consolidation Loan, borrowers could get out of default and have up to 30 years to pay back their student loans.
A late payment will start affecting your credit score after it’s 90 days late, but the most serious consequences hit when your loan goes into default.
For most federal student loans, that happens when you’re 270 days late on a payment.
We’ve outlined a plan for how to get out of default, whether you have federal or private student loans.
(If you’ve missed payments but aren’t technically in default yet, avoid it by signing up for an income-driven repayment plan, asking for deferment or forbearance, or calling your private lender to request a lower payment.) Federal student loans are considered “delinquent” the first time you miss a payment.
Not only that, but being in default can also damage your credit score, which in turn can make things like getting new credit or renting an apartment more difficult.
In addition, borrowers could face collection fees that add more to their balance.
When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.
So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.
Additionally, you’ll get a new loan term ranging from 10 to 30 years.
It is the lack of knowledge about options that may cause many borrowers to end up defaulting on their student loans.
If you are in default on a student loan, it means you have not made a payment in, at least, 270 days. If your loans are in deferment or in forbearance, you may not have a made a payment in that period of time, because a payment was not required.