How to settle student loan debt? Is this even possible? Yes, it is. Whether you are a private student loan borrower or a federal student loan borrower, you can always settle out your student loans but only if you know what to do and how to go about it.
Fortunately for you, this post is a guide on how to settle student loan debts. So, continue reading to learn everything that is needed and related to successfully settling your student loan debt.
How to Settle Student Loan Debt
Although federal student loan debts and private student loan debts work differently, they both can e settled in the case of default or not in the event you chose to. You just may be able to settle student loans for less than the original amount that it is owed in the event that they are in default and you also cannot repay them.
Reasons for Student Loan Debt Settlement
Now that you have learned that you can actually settle your student loans, you should also know that there are reasons for student loan debt settlements. You just cannot choose to settle your student loan debts, well technically you can. But at most times, when such happens, it happens for a reason, and in this segment of this post, I will be discussing them with you for both federal and private student loans.
Federal Student Loan
When it comes to federal student loan settlements, these are not so common. And the reason for this is because the Department of Education in the US and other federal student loan holders has their own ways of getting money from loans that are defaulted such as wage garnishment and tax refund garnishment. They may however make an exception in one of the following cases;
You Cannot Afford To Repay the Loan Amount
You should know that there is no set hardship when it comes to the settlement of debts. You will very much likely have to provide copies of your tax return, pay stubs, and other documentation just to make your case.
One main sign that your payments are too big is in the event you qualify for Pay As You Earn or Income-Based Repayment. Those types of repayment plans require you to have a partial financial hardship as per the calculations of the Department of Education.
You Have Defaulted More Than Once On The Said Loan
Rehabilitation as you should know is the best option for recovering from default simply because it removes the default from your credit history as debt settlement will not. But you can however rehabilitate defaulted loans only once. And if you have re-defaulted on the very same loan, then your loan holder may just be more willing to work with you due to your limited options.
Your Loan Holder Cannot Collect the Debt
Your loan holder may just get to accept a debt settlement because it can’t get the money from you any other way. For instance, you moved out of the country and you can no longer have your tax refunds seized or your wages garnished.
Private Student Loans
Settlements for defaulted private student loans on the other hand are more common in contrast to their federal counterparts just because these lenders don’t have the collection leverage of their federal counterparts. A private loan holder as you should know may just accept a settlement in one of the following instances;
You Have Little To No Income or Assets
Your loan holder as it is will very much likely make its decision based on its perception of your ability to repay. You will however need to show the reason why it will not be able to get much money from you in the future, such as a case that you are suffering from long-term financial hardship.
You Have a Strong Legal Defense
Private loan holders can easily force repayment just by suing you. And in certain states, if it is that our loan holder wins a court judgment, it could gain the ability to garnish your wages or even get to take money directly from your bank account.
But if it is that you can prove in court that the statute of limitations on your student loans has expired or that the debt is unenforceable for yet another reason, and you could get to prompt a settlement or even a dismissal of the debt.
How to Get a Student Loan Settlement
The best way to get a student loan settlement is to meet with your lender. You can choose to make the negotiations for the settlement yourself or you can hire the services of an experienced attorney. Or you can choose to work with a debt settlement company.
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