If you have several loans, loan consolidation enables you to combine them into a single loan with one interest rate and repayment schedule.
What consolidation involves. A defaulted student loan may be included in a consolidation loan if you have made satisfactory arrangements with the loan holder to repay your loan. This usually means that you've made three consecutive, voluntary, and on-time payments . A guaranty agency may charge you collection or late fees up to 18.5 percent of the outstanding loan (including the principal and interest). Those fees begin at the time the defaulted loan is certified for consolidation.
Benefits to consolidation. Consolidating your defaulted student loans carries several benefits. First, a new loan is created that combines all eligible loans into a single loan with a single monthly payment. Any derogatory information on your credit rating is upgraded to show that you have a loan in good standing. (The repayment terms and the time it takes to pay the loans in full vary, depending on the type of program you participate in.)
Under the terms of the new loan, you will have the right to payment relief if necessary. In addition, you regain your eligibility to receive federal student loans in the future.
Eligibility requirements. The requirements vary depending on your specific loan program and lender.
How to consolidate. You can consolidate your loan through your lender or through the Department of Education’s loan consolidation program.
Assistant Director of Enrollment Services
for Financial Aid
|Financial Aid staff|
|Student Loan Survival Guide
Financial Aid and Financial Literacy
Hours of operation:
8:00 a.m. to 5:00 p.m.
Monday through Friday
(except for official holidays)
Office of Enrollment Services
The University of Texas Medical Branch
301 University Boulevard
Galveston, Texas 77555-1305
Telephone: (409) 772-1215
Fax: (409) 772-4466