Can you settle a student loan? Well, the answer to the question is a YES! Settlement of student loans is very much possible, but the truth is that you are at the mercy of your lender as to whether to accept less than what you owe.
Can You Settle a Student Loan
You can always settle your student loan whether they are private or federal. But you should however know that the process is a very long and complex one. With that being said, you should be well prepared to follow through with all of the challenges that come with settling your student loan debt.
Before I go any further in this post, here is something you should know. You should not miss out on your loan payments and then force a debt settlement, doing this will make you damage your credit severely as collection costs can be added to the amount that you owe. The savings at the end of the day may be way less than what you might have hoped for and as such, and there is no guarantee that your lender will even negotiate with you.
When Can You Settle Student Loans
Lenders of federal and private student loans will require that your loans be in or near default to begin settlement negotiations. Federal student loans as you should know enter default after 270 days of past-due payments. The timelines vary for private student loans on the other hand, but default often happens after 90 days of missed payments, according to the Consumer Financial Protection Bureau.
Federal student loans as you should know are rarely discharged via bankruptcy, but private loan discharge in bankruptcy on the other hand might just be an option in a bid to get rid of your private loans.
Federal student loans have other options that could easily eliminate your debt. Defaulted federal student loans can however be discharged in instances such as school fraud as well as total and permanent disability, but they are however not eligible for loan forgiveness. If you would otherwise qualify for forgiveness, then you should return your loans to good standing instead of just settling them as you will likely get to save more money.
Reasons for Federal Student Loan Settlement
Federal student loan settlements as you know are not very common because the Department of Education as well as other federal student loan holders have their own ways to get money from defaulted loans, such as wage garnishment and tax refund garnishment. They however may get to make an exception in the following situations:
- You cannot afford to repay them
- You have defaulted more than once before on your loans
- Your loan holder cannot collect the debt
Reasons for Private Student Loan Settlement
Settlements for defaulted private student loans are however more common than federal loans because these lenders don’t have the collection leverage of their federal counterparts. A private loan holder as you should know may accept a settlement in one of the following instances:
- You have little to no income or assets
- You have a strong legal defense on your side
How to Get a Student Loan Settlement
Settling a student loan is possible but not easy. You can easily attempt to settle student loans on your own or with the help of a more experienced negotiator such as a lawyer or an attorney. Or you can choose to employ the services of a debt settlement company.
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