Consolidating loans in default
Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to consolidate them for you.When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.
Collection agencies usually add collection fees to the total loan amount, as well. In addition, each month a payment is missed, a late mark is added to the credit reports.
This can cause significant damage to someone’s credit reports and scores.
Negative information in the credit report impacts everything from borrowing money to renting a house or apartment.
So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.
Additionally, you’ll get a new loan term ranging from 10 to 30 years.