help! Need advice

I called NCO regarding my debt (student loan) which has been in default for about a year or so. The total debt including penalties and interest is $18,688. The first guy I spoke to when I mention loan consolidation said I couldn't do that because it was federal. I didn't understand what he meant by that. I went on beforehand to research direct loan consolidation and I seem to qualify. I don't know if they want it to seem I have limited option and just deal with them. He transferred me to a higher representative to talk to me about payment options. The payment options weren't real options. As much as I want to resolve this and I do it was just over the top and I can't afford it. I am financially strain and on the job market. I stated that. The guy said either I pay in full and settle w/ paying $14,500 or second option make a down payment of 1/3 of the total debt which $6000-plus and subsequent payment of $353 a month till debt is paid. I was disheartened because I can't come up with that kind of money. I cannot afford it according to my financial situation. He said that was to rehabilitate my loan.

But I guess my only option is to consolidate. I'm just onfused and stressed. When the rep told me I can't consolidate I felt so trapped. Was he just saying that? Can I consolidate? Please help. Thanks in advance for any advice given.