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Home > Ask The Get Out of Debt Experts > Sallie Mae Made Me an Offer to Settle My Student Loan Debt for Half. – Maria

Sallie Mae Made Me an Offer to Settle My Student Loan Debt for Half. – Maria

“Dear Steve,

I have student loans dating back to 2000. I recently got an offer from sallie mae to reduce my principal(104,000) by half(55,000) and then make equal payments for 94 months.

Would this affect my credit score. Will it be better for me to keep paying for 17 years my debt?


Dear Maria,

That’s a pretty nice offer. One that many don’t get.

The forgven debt will be shown as a bad debt. But you can recover it. I would suggest you read my guide How to Easily Rebuild and Repair Your Credit After Bankruptcy, Foreclosure, or Repossession.

The much bigger issue here is if you are not insolvent, meaning your liabilities exceed your assets, at the time the debt is forgiven, you may owe income tax on the amount of debt forgiven.

If you are or will be insolvent, the IRS has a process to avoid a tax liability when settling by completing a Form 982.

Obviously, you should speak to a tax advisor to make sure you don’t have a tax surprise.

Please post your responses and follow-up messages to me on this in the comments section below.

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About Steve Rhode

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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