However, we suggest considering other paths to manage your student loans. If you have federal loans, the good news is that they have better protections and options for borrowers to prevent default, like income-driven repayment plans and forgiveness programs.
We also recommend looking into refinancing if your current loan terms are not going to work for you. All in all, a settlement is a rare solution for the rare borrower. We recommend pursuing it only after careful consideration. Would you ever consider a student loan debt settlement? Why or why not? You can learn more about him on the About Page , or on his personal site RobertFarrington. He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He is also a regular contributor to Forbes. Other Options. Get Out Of Debt. How To Start. Extra Income. Build Wealth. Credit Tools. Can you settle your student debt for less? Settling Private Student Loans Debt settlement is more common with private student debt , though not quite as common as settling other kinds of debt. Strategic Default To Get A Settlement Some people consider defaulting strategically for the purpose of settling their loan.
Evaluating All Your Options However, we suggest considering other paths to manage your student loans. Robert Farrington. Connect with. I allow to create an account. When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings.
We also get your email address to automatically create an account for you in our website. Make contact yourself. For defaulted student loans, this will likely be a collection agency. Contact them and ask to discuss settlement options. Hire an attorney. Choose a student loan lawyer or an attorney who specializes in debt settlements. You will likely have to pay legal fees, and lawyers cannot guarantee better savings than you can get on your own. Attorneys can negotiate federal student loan settlements but may prove most helpful if your private student loan holder has sued you.
Work with a debt settlement company. Check that your lender will before selecting this option. If you and your loan holder agree to a settlement, get the offer in writing. Temporarily reduce your monthly payments. Consider these vetted resources for student loan help ; they are established organizations with verified histories:. The Institute of Student Loan Advisors. Advice on repayment plans, forgiveness programs and dispute resolution.
National Consumer Law Center. Comprehensive information on options for student loan borrowers. Student Borrower Protection Center. Advocacy on behalf of all borrowers to influence policy. National Foundation for Credit Counseling. Complete financial review for struggling borrowers, which can include advice on student loan options and plans for dealing with other debt.
American Consumer Credit Counseling. Advice on repayment plans, help with paperwork and budget counseling. National Association of Consumer Advocates.
Information for student loan borrowers and an attorney directory. Help for borrowers who have already filed bankruptcy that did not include their student loans. Adam Minsky. Advice on defaults, dispute resolution, collections, debt settlement and legal remedies. Licensed in Massachusetts and New York. Stanley Tate. In these plans, your payments are based on your income and how many people are in your household.
If you have good credit or higher, refinancing could secure you a lower interest rate than what you have now, and you can pick a plan with low monthly payments. Settling your student loan debt will hurt your credit score. For one, lenders report loan default to the credit bureaus, and you usually must be in default in order to initiate a settlement — though you can ask the lender to remove the default from your credit history as part of the settlement agreement.
Because the lender takes a loss when it settles, an account that was settled for less than the full amount also shows up as a negative mark on your credit reports. A settled account can remain on your credit report for up to seven years, but its impact lessens over time.
How much money you can save by settling your student loans depends on how much you owe, as well as the outstanding collection charges and late fees associated with your delinquent loans. Sometimes, a settlement waives the late fees, collection costs or a portion of your interest. In some instances, you could get a small percentage of your principal balance waived as well.
You might be able to save 10 percent to 50 percent of your loan balance. You may also have to continue paying collection fees and interest in the meantime.
With any debt, the best way to get rid of it is to pay for it. You might qualify for deferment, forbearance or an income-driven repayment plan. You could also refinance your loans to get a lower interest rate or lower monthly payment or both. How We Make Money. Dori Zinn.
Written by. Dori Zinn has been a personal finance journalist for more than a decade. Edited By Chelsea Wing. Edited by. Chelsea Wing. Chelsea has been with Bankrate since early She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Reviewed By Mark Kantrowtiz. Reviewed by.
Mark Kantrowtiz. Mark Kantrowitz is an expert on student financial aid, the FAFSA, scholarships, plans, education tax benefits and student loans. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. You might want to consider a student loan settlement if: Your loans are in default or near it.
You have a lump-sum payment to settle your outstanding debt.
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