All You Need to Know About Student Loan Negotiation

You might have to pay off your student loans for decades. You might not be able to prioritize paying your student Student loan negotiation among your home loan, utility and auto loan payments. Consider negotiating your student loan payoff with your lender if you’re struggling to make payments. The amount you owe might be less than what you settle for.

If you are experiencing the following:

• There are defaults on your loans (or near defaults).
• To settle your outstanding debt, you will receive a lump-sum payment.
• A bankruptcy filing is the alternative.

Settlement of Student Loans: what is it?

Settlement of student loans refers to paying off your student loans for less than what you currently owe. If you have some cash saved up and your loans are in default, your lender might be willing to settle. The option is good if you are behind on your debts and can pay them off right away.

Depending on your lender, your settlement will vary. A lender may accept 50 percent of your loan whereas another may demand 90 percent. Often lenders will accept a settlement if that is the only option they see as allowing you to repay your debt.

My Student Loans are Due to be Settled When?

Getting rid of your student loans may take some time. When your loans are current and you pay on time each month, you cannot settle. Unless you’ve been in default for at least 90 days, you are not eligible for a loan.

Deferred payments are treated as delinquent loans until they are made. The loan will eventually go into default if you do not make payments while it is delinquent. If your loan is about to default, you can start requesting a settlement in delinquency. After a loan has fallen behind, you can request a settlement.

Reasons for Settling Federal Student Loans

Federal student loans may be eligible for debt settlement if:

• Paystubs, bills, or recent tax returns will be required as proof that you cannot afford the loan.
• There may not be any other financing options if you’ve defaulted on the same loan more than once, such as rehabilitation, income-driven repayment plans, deferments, or forbearances. You might instead have to settle if you want to avoid further legal action.

You may not need settlement if you’re behind on your loan and need a little more time to catch up, or if you want to repay your loan but need a different option.

Private Student Loan Settlements: Reasons for Them

Settlements aren’t only available to borrowers of federal student loans. Defaulted student loans can also be settled privately.

Most federal student loans are considered delinquent after 270 days if payments haven’t been made. If you don’t pay your student loan after 120 days, however, most loans will default.

A lender might accept a settlement offer if you can prove you don’t have the income or assets to repay the loan. It’s still important to have a reasonable offer, which usually involves a lump-sum payment or a series of installments spanning several months.

Paying off your Student Loans: How to Negotiate

If your loans are near default or in default before starting negotiations, make sure they are either there or near default before beginning the process. Alternative repayment plans may be suggested by some lenders, but if your loans exceed hardship assistance, you might be able to negotiate a student loan settlement.