Defaulted FFEL or Direct Loan Program loans
Borrowers with defaulted FFEL or Direct Loan Program loans may be liable for collection costs incurred to collect the loans. If the holder of the defaulted loan, which may be either the U.S. Department of Education or a guaranty agency, retains a collection agency to collect defaulted loans, charges imposed by the collection agency may be added to the amount borrowers owe. This means that the amount of the Direct Consolidation Loan may include collection costs of up to 18.5% of the principal and interest outstanding on the defaulted loan.
For defaulted Perkins Loans and health professions loans, collection costs may equal as much as the amount owed at the time the defaulted loan is paid off through consolidation.
Source: Department of Education
