My situation in a nutshell: About 4 years ago I defaulted on my student loans (never consolidated, and all Perkins, Stafford or UDL loans). I've had no contact with them since; I changed my phone number, address, even name.

Then, last year I got a job, and sure enough my federal income tax refund was "offset" and routed over to Sallie Mae. I'm sure they'll take my fiscal stimulus check too, if they haven't already. I've submitted a "financial hardship" form to Sallie Mae, including a 3-day notice from my landlord and documentation on all my expenses and the fact that I'm on sick-leave from work, hoping they'll return my tax refund to me and not take my fiscal stimulus check. (Anyone have any idea what my chances of success are here?)

I also spoke to the collection agency for my student loans - they said I'd have to pay a couple hundred a month (1.2% of the amount owed per month) for 9 months to rehabilitate, but when I explained my financial situation (no income, almost completely broke), they said my only real option is a "William D. Ford income-contingent consolidation". This would get my loans out of default in 45 days (or less), after which time I could ask for a deferment based on my financial status. After that I could negotiate payments based on my (future) income rather than a fixed 1.2% of the loan amount.

What do you guys think? I know I heard there is some big disadvantage to consolidation.... is this a good idea?

I'm not even sure these people are handling all of my student loans... it seems they're only handling about half of them. No idea when the other half will catch up to me.... or could they have disappeared?

Also, will all the negative info regarding my student loans really disappear if I do this consolidation, or are they lying to me?

I don't trust these people, but I do trust you guys. Please help!

Hi, I'm a fellow borrower who was able to resolve my loan problems. Browse around this forum and you'll find accurate info.

Consolidating will not clear the default/collection from your credit record; it remains for 7 years. Rehab will clear the default/collection agency info from your record (but not the initial lates). Depends how important your credit record might be to you in the next few years. You have the right to rehab based on a "reasonable and affordable" monthly payment plan for less than the 1.2%, but it can be difficult to get a collection agency to cooperate with you on that.

If you are receiving wages you are subject to garnishment of your pay (15%), and once you are being garnished you have to make payments above and beyond the garnishment in order to rehab, so it's better to get a handle on things before you are garnished.

Your stimulus payment will be taken, alas, along with your tax return. I don't know what your chances are for getting them back, maybe a bit slim.

If you are acting on any of your loans you should find out where they all are from the National Student Loan Data System (you have to give your info and receive a pin number):

http://www.nslds.ed.gov

You want to know how much they are and where they all are, including the Perkins, so that if you want to consolidate, you can consolidate them together--you don't want to leave one out.

Also, remember a loan can't be rehabbed if there is less than $1000 left after the rehab payments.

Good luck! Keep us posted.