student loan settlement debt relief can help resolve your debt problems.
Your financial situation is different from someone else. The student loan settlement debt relief service that works for someone may not be the best choice for someone else. You should take the time to understand all the debt relief options available to you to find the best solution for your needs and goals.
Student Loan Settlement Guide Locator
What Is Student Loan Settlement?
Student loan debt settlement (or debt adjustment) is the process of resolving delinquent debt for far less than the amount owed by promising the lender a substantial lump sum as full payment. Normally a debt settlement option occurs with your unsecured debt like credit cards, medical bills and personal loans. However this debt relief option can also apply to student loans and borrowers can arrange to pay less than what they originally owed. But it can be difficult to negotiate, does come with negative considerations and there are alternatives to think about if you find yourself in loan default.
Is Student Loan Settlement Possible?
This debt relief option is only possible if you are in default on your student loans due to a financial hardship. In general, the time to pursue debt settlement is after you have gone into default (and the collections process has begun), but before any legal actions have been taken by your lender. Your loan lender may agree to settle for a lower amount than what you borrowed if it means resolving your debt without the need for collections, court judgments, or other actions.
However there is no legal obligation for your lender to negotiate. And, unlike other type of unsecured debts, student loans, with few exceptions, do not qualify for being discharged in a personal bankruptcy judgement. This means that your loan lender has less incentive to negotiate a settlement with you.
Private Loan | Federal Loan
Is It A Real Possibility For You?
To negotiate a settlement with the student loan lender, your loan has to be in default, you have to have a long-term financial hardship and you have to available a large amount of money to negotiate a lump sum loan payoff. However, if you did have a large sum of money, you probably would not be in default of your student loan. (This excludes the concept of a strategic default, which poses many legal risks for you.)
But some people might be in default and have other finances pending, like an inheritance or a gift or a loan from a family member. You may also find in your negotiation with the student loan holder that large installment repayments may be accepted as an alternative.
The decision to negotiate a settlement of your student loan is unique to each person’s financial situation. You have to determine the outstanding balance on your student loan, the range of settlement discounts that can be accepted by the holder of your loan and whether you have the financial budget to negotiate an acceptable settlement offer.
Settling Private | Settling Federal
How Much Can You Save?
Remember no debt collector, be it federal government or a private company, will allow you to settle your loan for less if you have at least a reasonable chance of paying it back. You need to demonstrate a serious, long-term financial hardship, where it is apparent to both parties that you will not be able to pay the outstanding balance on the student loan.
Private student loan debt settlement amounts vary greatly. You student loan holder may not accept less than 80% of the total owed, whereas other lenders will take less than 50%.
Federal student loan savings are not nearly as large. The Department of Education provides its loan collection agencies with specific guidelines for how much of the debt is acceptable to waive. You may receive one of the following:
- 100% of collection costs waived.
- 50% of interest owed waived.
- 10% of principal and interest waived.
Whether you settle federal or private student loans, you may owe income taxes on the amount that you do not pay and is forgiven.
If you and your loan holder agree to a settlement, get the offer in writing. Once you have paid the amount as required, make sure you receive a paid-in-full receipt. You will want to hang on to that in case questions about your debt arise in the future.