If you have defaulted on your student loan, it is now possible to consolidate defaulted student loans. Furthermore, some plans can even help you eliminate the mark of default from your loan. This greatly helps students, as they do not have to live with the burden of debt and are able to complete their education without any financial obligations.
The loan provider informs the borrower about the date from which he must start making the payments. This date usually falls between six and nine months after finishing graduation or school. The lender continues to remind you and takes measures to collect the loan from you. A failure to make the payment for 270 days, in case of monthly installs and 330 days in other case, leads to default of student loan. Once the loan is defaulted, it is handed over to a guaranty agency. At this stage, you can no longer apply for deferment or forbearance of your loan. Also, your credit score is affected adversely.
This can have very grave consequences. Firstly, you will be asked to make a single payment, amounting to your total dues, including the interest. To recover the arrears, the agency may legally counterbalance your payments and state tax refunds, if any; a part of your salary may be directed towards the repayment of your loan, directly through your employer; you will not be able to qualify for any federal loans in future; it may be handed over to a collection agency, in which case you will be required to pay additional collection fee; and you may face legal action. So, if you consolidate certain student loans, you can save yourself from these harsh effects of payment default.
However, it is in your best interest to take steps to avoid the state of default of student loan. To evade the situation, you must act responsibly towards your debt. You must always make timely payments, in all circumstances. Even if you have not yet completed your education, have not got a job, or have filed for forbearance or deferment of your loan, you must continue to make payments.