Can You Consolidate Defaulted Student Loans?

Do you wonder, can you consolidate defaulted student loans? Defaulted loans are considered defaulted if you haven’t made a payment in 270 days. That’s a very generous amount of time to allow you to make an effort by making a payment, which is why defaulting on a student loan is viewed by some lenders as a worse mark on your credit history than even bankruptcy.

Can You Consolidate Defaulted Student Loans?

By defaulting on the loan, you will not only take a serious drop in your credit score, but you can be sued, have your wages garnished, or end up forfeiting any state or federal income tax refunds as those can be taken automatically by the government and put toward your loan balance. The extra costs can rack up very quickly, too. You could end up having to pay an extra cost that amounts to up to 25% of the loan balance, which can be substantial if you have a lot left on your loan. And it won’t go away. Collection efforts will go on for at least 25 years in the case of a federal student loan.

There are ways to rehabilitate the loan by making payments on time and making a real effort, but can you consolidate defaulted student loans? The good news is that in some cases you can. While you can repair it without consolidation that requires that you make payments on time for a period of 9 months to a year.

After that, the loan default is removed from your credit report so it’s as if it never happened. Your credit score will still be lower because the missed payments and late payments will still be there for 7 years, though the default itself is removed.

Can you consolidate defaulted student loans and avoid that? Yes, you can, after three months of on-time payments in a row. After that, you can get a federal student loan consolidation just as if you’d never defaulted. Doing it this way, however, does not remove the default from your record so your credit will take a more serious hit for that 7 year period than it would if you rehabilitate the loan first.

So can you consolidate defaulted student loans; Yes, but unless your need for a smaller payment is far greater than your concern about your credit score you may wish to first rehabilitate the loan by making 9 to 12 consecutive on-time payments first so that the default is wiped from your credit report.