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I am currently trying to handle two defaulted student loans. I would like to pay them off with one lump sum payment, but understand that I could be hit with a 25% penalty fee on top of the principal and interest if the loans are still in default when the settlement is made. Is there a way around this? If I get a direct consolidation loan, will that take the loans out of default immediately? Would I then be able to negotiate a lump sum settlement (without the 25% penalty)? Thank you in advance for advice!