What are my loan consolidation options?

Avoiding Student Loan Default

The consequences of defaulting on federal or private student loans can be severe. The U.S. Department of Education, in particular, possesses strong powers for collecting on defaulted federal student loans.

What Can Happen When Student Loans Go Into Default

Characteristic Federal Student Loans Private Student Loans
Number of days of non-payment to go into default 360 days 120 days
Action required to garnish your wages U.S. Department of Education can garnish without a court order Lawsuit and court judgment required
How much disposable pay can be garnished? 15% 25%
Can collection charges be added? Yes -- up to 20% of each payment Yes (not limited)
Default reported to credit agencies? Yes Yes
Can Social Security disability and retirement benefits be withheld? Yes -- up to 15% No
Can tax refunds be intercepted/offset? Yes No
Bankruptcy discharge Nearly impossible Nearly impossible
Statute of limitations applies No Yes

Tips for Avoiding Default

Already in Default?

If you are currently in default on your federal or private student loans, the first thing you should do is contact your lender or loan servicer to find out how to get your loans out of default, which is sometimes referred to as rehabilitation. The U.S. Department of Education will allow you to consolidate defaulted federal student loans as long as you agree to Income-Based Repayment.

Your primary goal should be getting a monthly payment you can afford right now. When your finances improve, you can speed up your payments to save money on interest.

What are my loan consolidation options?