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Take a look at the chart below to compare the benefits of loan rehabilitation versus the benefits of loan consolidation.

*NOTE: We previously indicated that loan consolidation would result in removal of the record of default from a borrower’s credit history.

If you make three voluntary, on-time, full monthly payments before consolidating, you can choose from any of the repayment plans available to Direct Consolidation Loan borrowers.

One option for getting your loan out of default is loan rehabilitation.

That cell of the table has now been corrected to indicate that loan consolidation will not result in removal of the record of default from the borrower’s credit history.

If you rehabilitate a defaulted loan, the record of the default will be removed from your credit history.

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To rehabilitate a defaulted Federal Perkins Loan, you must make a full monthly payment each month, within 20 days of the due date, for nine consecutive months.

To rehabilitate your loan, you must choose one of the two payment amounts.

Your loan holder may be collecting payments on your defaulted loan through wage garnishment or Treasury offset (taking all or part of your tax refunds or other government payments).

While loan rehabilitation takes several months to complete, you can quickly apply for loan consolidation.

However, loan rehabilitation provides certain benefits that are not available through loan consolidation.

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