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Can I Settle My Student Loan for Less Than I Owe? – Lilly

Graduated from a Colorado college but need to pay off school debt that went to collection

Can I settle for less than the debt amount with a collector acting for the State of Colorado?


This is your chance to be a hero and help out this person by providing your feedback and answer to the question in the comments section below.

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About Consumer

This is information that was submitted by a third party and not generated by or Steve Rhode.
  • Msullivan


    It is difficult to settle student loans. The law gives them special status so that they cannot typically even be forgiven in bankruptcy. It may be possible to convert your loan into an income based repayment plan that might lead to limited payments or find another forgiveness option but I would not be optimistic that the collection agency or the state authority that guarantees the loan would settle for less than the original loan amount (they may well agree to negotiate away penalties and added interest).

    In any event, you need to get the loan out of default and engage the state agency about options. You should do your homework first at Look to the right and click on student loans, forgiveness to see exactly what your options are. Don’t ignore this. Like most personal finance issues it won’t get better with time.

    Good Luck!

  • mc


    It depends. You hadn’t mentioned whether your loan is a private student loan or a federally-backed loan.

    If your loan is backed by the federal government, you can rehabilitate your loan. This means you can work with the lender or collection agency and make a series of payments that would bring your loan out of default status.

    If you have a private student loan, you can work with the collection agency to settle your debt, usually for less than what you owe. However, typically this means making a lump-sum payment.

    Whichever route you chose, get everything in writting before making any payments.

    Good luck.

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