Debt Settlement

I Need an Honest Answer if I Should Settle My Debt

Written by Steve Rhode


Dear Steve,

I have private student loan date mid 2014 around $8000.00 dollar. My college made payment arrangements and I was paying just 25 dollars a month now they reported credit bureau saying accounts charge off and transfer to collection agency. I spoke to collections agency and they want to settlement the loan about 50%.

My question now is should I accept or decline this offer? If reject this offer what could be consequences? I am really confused what should I do . Expecting honest answer please.



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Dear Krishna,

Depending on what state you live in the Statute of Limitations may have expired and you could use that as a defense if you were sued over the old debt.

However, debt settlement is a process where to parties come to an agreement on how to resolve an old debt. The amount of the agreement is between the debtor and creditor. There is no set amount.

If you do decide to settle the debt the amount you pay should be reported as paid and the amount that is charged off / forgiven can be reported as a bad debt. That reporting should extend for 7 years from the date you last went delinquent on the debt which sounds like 2014.

The amount of debt forgiven may be treated as taxable income to you if you are not insolvent. You can get more information on that here.

You can either attempt to negotiate with the collector yourself or hire someone to deal with the creditor and make the process as smooth as possible. Another advantage of hiring an experienced professional is they will have a better idea what the current typical amount that specific creditor is settling for.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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