The Private Student Loan Lawyer Says I Have to Settle

Dear Steve,

I have defaulted on a student loan in the amount of $33,240 with NCO. A law firm has called me and says that I must settle for $26,592 in the month of August or I can get on a repayment plan for $9,972 and then a monthly payment of $332 but keeping in mind my interest will accrue at a rate of 7.45%.

But, if I even want to do a repayment plan I have to first show that neither my father and I can pull out the $26K from retirement funds, or get a loan, separately. Also, I have to show that I am in financial hardship (which I definitely am as I am paying most of my income to rent/living bills/utilities/student loans. I hardly have a few dollars left over, if anything.

Do I have any options to figure out a way to get on a payment plan without paying that $9k, that I do not have? I don’t have any lump sums of money just sitting by the wayside to pay this off, which is how I got into this situation in the first place.

Are there any OPTIONS out there for young professionals who have so much student loan debt that we default and are unable to even find a way to may manageable payments?

What option do I have, if any?


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Dear Sunaina,

You are not required to settle for any amount you don’t want to. But if you cannot come to an agreement with the lender or it’s agent/lawyer then the lender may pursue the options specified in the student loan agreement. This might include suing you.

It sounds as if the loan is delinquent and that your father co-signed for the loan. This makes him 100 percent responsible for the loan if you don’t pay.

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This also sounds like a private student loan rather than a federal student loan but from what you shared I’m just guessing at that.

I would suggest you read through The Ultimate Guide to Dealing With Student Loans You Can’t Afford and take a look at all the options available.

With private student loans the options are somewhat limited. Most commonly you can:

  1. pay the full amount due;
  2. pay an acceptable monthly payment;
  3. settle the debt for less than the full balance;
  4. get sued and attempt to negotiate a solution during the case; or,
  5. explore bankruptcy and see if your private student loans would be eligible to be discharged in bankruptcy.

Many people are surprised some private student loans can be discharged in bankruptcy. The student loan guide I linked to above has information in it about dealing with student loans in bankruptcy.


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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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1 thought on “The Private Student Loan Lawyer Says I Have to Settle”

  1. Steve is far too polite. My advice to Sunaina is, if you truly can’t afford the payments (and certainly not the “down payment”) that the collections scumbags are proposing, then tell them to piss off and send it to litigation. There, you will at least have an impartial body looking out for your legal rights, or at least the non-violation of them. They can’t get blood from a stone.


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