Pros and cons to consolidating student loans

After 270 days with no payments the loan goes into default, which means the loan is assigned to a collection agency, the borrower loses eligibility for forbearance or deferment, and she faces the possibility of wage garnishment and a tax offset.On top of that, student loans in default are reported to the credit bureaus, and it could take years to re-establish a credit rating.Once you’ve made your nine payments, your loan is considered rehabilitated and the default is removed from your credit history — although the late payments will remain on your credit history.During the period of rehabilitation, you may still be contacted by collection agents since they may continue to pursue borrowers during the process of rehabilitation.

Each option has its pros and cons, but either choice will set you on the right track to getting out of default and improving your financial situation.If your student loans are in default, the stress of dealing with collections agents, possible wage garnishment, and tax offsets can be enough to make you want to bury your head in the sand.But your situation can only get worse if you are not proactive and explore the options available to you.If you cannot afford those payments, you may ask your lender to recalculate the payment amount based on your documented income and expenses.It’s possible for borrowers in extreme financial distress to have rehabilitation payments as low as .

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