Determine your loan type. Federal student loans generally fall into one of two categories, Federal Family Education Loans (FFEL), which are funded by banks and other financial institutions, and Direct Loans, which are funded directly from the federal government. Make a list of all your outstanding loans, including the name of the lending institution, the account number, and the outstanding balance. You may obtain this information from the National Student Loan Data System (NSLDS) website.
Determine how much you can afford to pay. Consolidation programs offer several repayment terms, including an income-based repayment term. If you're applying for a Direct consolidation loan, you will be required to make income-sensitive repayments. Calculate your total monthly income minus your total monthly expenses to determine the amount of your disposable income. This will give you an estimate of how much you will be able to afford each month.
Make three affordable monthly payments on FFEL loans before applying for consolidation. Once you've completed this trial period, contact the lender directly to inquire about consolidation. Submit your application for consolidation, providing relevant personal information along with a detailed list of your outstanding loans. Sign the required promissory note and provide at least two references. Submit the application to your lender, along with any supporting financial documents to help determine your income-based repayment amount.
Apply for a Direct Consolidation Loan by visiting the Direct Loan Consolidation Center's website. Fill out the online application, again including relevant personal information and the details of your defaulted loans. Electronically sign the promissory note and submit your application. If you are agreeing to income-contingent repayment, you will also need to provide the necessary supporting financial documents.
Sign and return any necessary documentation and provide any supporting paperwork you may need to prove the circumstances of your financial situation. Choose your repayment method and begin making regular payments. If after making nine consecutive payments in your consolidation program, you may be considered for loan rehabilitation, wherein your loan is sold to another lender and your default status is stricken from your credit.