The best option is to rehabilitate the loan after 12 payments are made. Then the loan may qualify for deferment. Loan Consolidation Borrowers with defaulted loans can return to favorable repayment status through loan consolidation. To be eligible for consolidation, they must have made satisfactory repayment arrangements consisting of at least three consecutive, voluntary, monthly payments made within 15 days of the due date. Some lenders may require more than three payments.
Consolidation combines the borrower's eligible federal loans into one.
Depending on the size of the debt, borrowers may have 10 to 30 years to repay their loans. Borrowers who consolidate regain eligibility for deferment and Title IV aid. After consolidation, borrowers credit records show the loans as paid in full but still in default. Borrowers should check to see if their lender offers loan consolidation. Bankruptcy Many people choose bankruptcy as their best option to resolve debt and default problems.