One of my readers, Sarah, recently shared her experience settling student loan debt. It a good followup piece to my article This is How You Can Settle Your Navient Student Loan.
Sarah mentions several points that need clarification. But overall, she has learned, as others have, that you can settle private student loan debt in some situations.
Sarah writes in and shares this.
I’ve seen you and other guest posts talk about discharging loans in bankruptcy so I decided to visit a lawyer and see what, if any, options I had with my crushing student loan debt. The balance after nearly a decade of payments was over $120,000 and growing. If I put everything I had I could bring down the loan balance but I couldn’t save a penny – not even for retirement.
My lenders refused to negotiate with me and I got fed up and decided not having a life is not an option. Instead of bankruptcy the lawyer I spoke with stated that private student loan debt can be negotiated down by stopping payment. The lender will send the account to collections and they’ll want to settle. He had already settled one account for $19,000 that was originally $78,000 in student loan debt another client could no longer handle. The only catch to this, just like Chapter 13 bankruptcy, is that you’ll need cash on hand to settle the accounts one by one. There is a flat fee per settled account charged by the firm and I can rebuild my credit in one to two years instead of going to court and fighting for a minimum of two years then have a terrible mark on my credit report for 7 – 10 years. [Steve Note: A settled loan is reported on your credit report for up to 7 years and 180 days from the time it went delinquent.]
I was stunned and he stated the best way to plan is to make sure I save 40 – 60% for each balance of every loan. He can’t guarantee that low of a settlement for every loan but it is the quickest route to freedom without having to go through lengthy bankruptcy proceedings or wasting time waiting on our useless Congress.
By treating it like credit card debt and negotiating down the lender will want money. I’m researching this option since my 791 credit score will take a hit. My cosigner is thinking of doing this with another relative since their loans are just as unaffordable and they have some Parent PLUS loans that I’ve told her can be forgiven since she already works in a qualifying job. [Steve Note: If you have a cosigner, the lender typically pursues them for the full payment.]
I hope this helps someone who was so desperate like myself. I truly thought that the only thing left was to stop payment and just ignore the lenders because I was so sick of not being able to buy clothes for work, buy food, or afford rent. This weekend we’ll do the research and see what the next step is because being forced to live with family and have no life is a death sentence for the area I earned my degree in. If I can’t travel then there is no point to try and find a job and I’ve had to scramble through every layoff to find anything. At one point I worked for abusive christian psychos who had no problem with physically attacking employees and when they bothered to pay us – 90% of my paychecks went to those heartless lenders! If I had sought help sooner my life would have gotten that much better faster. If you are fed up don’t wait! Seek help and save every single penny you can even if this option isn’t the best for you.
The only regret I have about this is not going sooner to get a free consult. It may not be the best option for everyone but I think it’s worth noting that it can be done. Prior to this I was wasting time going through your links only to have some lawyers state in the non-profit sector they either had no experience or that they can’t get rid of student loans at all. This was when those lawyers bothered to return my calls and emails.
This was the first firm where I was treated kindly and the lawyer I spoke with said it’s becoming a lot more common just to have people quit paying because it’s impossible to pay off their loans. [Steve Note: See my article, Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.]
Your credit takes a hit either way but I’d much rather get it over with and get a life. Nearly a decade of slavery is inexcusable and after looking at your retirement calculator I took the next step as fast as possible! Wasting my life working for a private loan lender isn’t a life.
Please share this information with your readers and they need to ask what the lawyer’s fee is for negotiating. The majority of my loans are private ($79,000+) and the rest are federal which I can actually afford after settling these debts. If I can stay on income-based repayment then I’ll just pay more towards interest and bring down the loan principal to get rid of the debt faster as mentioned in another savvy reader’s article. [Steve Note: But that can be a trap. See Why Income Based Student Loan Payments Can Be a Terrible Trap.]
I wasn’t an irresponsible student but I was one of many who graduated in the Great Recession only to scramble to find any job at all. My career went overseas to countries who subsidize the industry and of course the US is one of the few countries that doesn’t subsidize the area I still want to work in. This option has been a relief since I thought that bankruptcy might be the only way out. Now that this option was thoroughly explained it needs to be mentioned to others so that they can work with family members involved.
Thank you for offering such an educational site where desperate graduates can get some guidance and more importantly, hope.
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