Can I Consolidate a Defaulted Loan?
Generally, Federal education loan(s) in default may be consolidated in a Direct Consolidation Loan if borrowers:
* Agree to repay the loan(s) under the Income Contingent Repayment Plan.
OR
* Make satisfactory repayment arrangements with the current loan holder(s).
If, before applying for consolidation, borrowers who want to completely clear the default notation from their credit records, they may want to consider another option: loan rehabilitation. Borrowers should contact their loan holders to obtain more information about this option.
Borrowers cannot consolidate defaulted loans under these conditions:
* If a judgment has been issued against a defaulted loan, it cannot be included in the consolidation unless the judgment order has been vacated (dismissed).
* If they are trying to consolidate defaulted Direct Consolidation Loans.
* If they are trying to consolidate defaulted FFEL Consolidation Loans unless they have made satisfactory repayment arrangements with their current loan holder OR the borrowers agree to repay under the Income Contingent Repayment Plan.
* If they are trying to consolidate defaulted Perkins or health professions loans unless they have made satisfactory repayment arrangements with their current loan holders.
Source: U.S. Department of Education
