Consolidating a defaulted student loan
You combine all your student loans, take out one big consolidation loan and use it to pay off all the others.You are left with one payment to one lender every month.The missed payments that led to the default will remain on your credit reports.If you’re worried about being able to afford loan payments under a rehabilitation agreement or loan consolidation, keep in mind you can qualify for low monthly payments under an income-driven repayment plan.Payment history is the most influential aspect of your credit scores, so a slew of late payments and a loan default can really trash your credit, making it difficult to rent or buy a home, take out an auto loan or even get a credit card.(You can see how your student loans are affecting your credit by reviewing Defaulting on a private student loan has similar consequences: collection activity, legal action and credit damage.The consequences go beyond the world of student loans.In addition to the missed payments that likely led to your default, your lender can report the default to the major credit bureaus, further damaging your credit.
If you adhere to the terms of the agreement, the default will be removed from your credit reports with the three major credit reporting agencies, which can improve your credit.(It’s possible, but not easy.) Private education loans, however, are subject to statutes of limitations, meaning there’s a point at which it’s illegal for a lender or collector to sue you over an unpaid debt.Here’s a list of Bottom line: Avoid default if you can.Beyond that, you can try contacting your lender to ask about options for getting out of default.You’ll remain in default until you’ve repaid the loan, and federal and private education loans are rarely discharged in bankruptcy.