What is loan consolidation? Loan consolidation is the process of applying for a new loan that will be used to pay off your existing student loan debts.
Consolidation allows borrowers to combine one or more eligible student loans into a single loan with new terms and one monthly payment. Consolidation may allow you to repay your debt over a longer period of time at lower payments, but the total debt will be greater due to the interest that will be added to your principle balance.
Consolidating your MDHEWD defaulted loan
To be considered for consolidation, please contact the collection agency assigned to your account. If you choose to consolidate your student loan, the MDHEWD will capitalize collection costs in the amount of 18.5 percent of the outstanding principle and interest balance at the time of consolidation. Information on how to apply for a Direct Consolidation Loan can be found at studentaid.ed.gov/sa/repay-loans/consolidation.
Note: Consolidating your student loan does not delete the default information reported to the national credit bureaus. Only rehabilitation will delete the default from your credit report. Consolidation may not be your best option. Ask the consolidation lender about your payment options, interest rates and eligibility criteria. Fully evaluate your payment options and choose the one that best meets your goals and financial situation.