Can Student Loans Be Negotiated?: There are times when the person who owns your student loan might be ready to settle, like when you can’t make your payments or can’t get any other kind of help.
If you don’t make a payment on time for a student loan, your account will be called delinquent. When you don’t make payments for a certain amount of time, your loan goes into default. For most government loans, this is 270 days; for most private loans, it’s 120 days.
Getting a student loan back on track is possible in a number of ways. You could negotiate a student loan settlement with the person who holds your loan to get your amount paid off.
Student loan settlement
If you want to settle your student loan debt, you can talk to the lender about it, and sometimes you can get less than what you owe. Most of the time, you’ll have to make one big payment to settle the debt if the loanholder agrees to a settlement.
You may not be able to get a deal with all lenders or collection agencies, though, especially if you’re not too far behind on your bills. If you don’t pay your student loan, the debt collector might be willing to settle for less money to clear the account.
Also, remember that even if the settlement goes through, you will still have to deal with the effects of missed payments on your credit report. Late payments can hurt your credit score and stay on your credit report for up to seven years.
This could affect your credit and make it hard to get loans from other lenders in the future. The debt will also be marked as settled instead of paid in full. Keep in mind that the gap between what you owe and what you pay might be taxed as income.
How to negotiate student loan payoff
These four steps will help you decide if a student loan settlement is right for you:
Check how much you owe: Make sure you know how much you owe before you talk to a loan holder or debt collector about payments or a payment plan. The National Student Loan Data System lets you see how much you still owe on your government student loans. If you have private student loans, your credit report will show the amount you still owe. You can check this for free at AnnualCreditReport.com.
Consider how much you can pay: Look at your budget to see how much you can afford to offer as a deal. Gather proof of your income (like pay stubs or recent tax returns) and any proof of significant expenses to show your loan holder that you’re having a hard time paying your bills.
Negotiate with your loan holder: Once you have all the information you need, call the loan holder or debt collection to talk about paying off the debt and find out how much they’ll accept as payment. You should be ready to fully explain your finances and how much you’re willing to pay. If you ever agree to something, get the deal in writing before you pay for anything.
Following through on the agreement: If the person who owns your loan agrees to a settlement, you must pay the agreed-upon amount on time and in full to keep the deal. If you have a government loan, you likely have 90 days to pay the settlement amount unless you’ve arranged for a longer term. This can be different for each private student loan company, so make sure you double-check with them to get the exact amount of time you have to make the payment.
When can you negotiate your loans?
You’ll have a better chance of negotiating a school loan that you haven’t paid back. If you’ve made all of your payments on time, the loan holder probably won’t agree to a settlement because you haven’t shown that you might not be able to pay.
Reasons for a federal student loan settlement
When a loan holder might be more open to a deal for federal student loans, these things could happen:
Not able to pay your loans: You’re having a hard time with money, making it hard to pay.
Not eligible for payment relief: You can’t get student loan forbearance or delay anymore to put off making payments for a while.
Lack of other options to get your loans out of default: It’s not possible for you to fix or combine your bad loans again because you’ve already done that.
Access to a lump sum: You have enough money to pay off all your debts.
Reasons for a private student loan settlement
Here are some times when a private lender for student loans might agree to a deal:
Not able to pay your installments: You’ve lost your job or had another cash problem that makes it hard to make payments.
Credit has been damaged: You might be able to lower your interest rate or lower your monthly payments by refinancing. But to get student loan refinancing, you’ll usually need good to excellent credit. If your credit has been hurt by late payments or failure, it might be hard to get approved.
Account is in collections: You will have a hard time getting help from your lender if your loan has been sent to collections. The debt collectors may be able to help you reach a deal, though.
Access to a lump sum: You can get a lump sum of money that you can use as a settlement.
Always remember that settlement deals are made one at a time. There’s no promise that you’ll get a settlement even if your loan is in default, so don’t default on purpose if you want to settle.
Additionally, debt collectors have other ways to get your money, and if they can do this, they might be less likely to agree to a deal. For example, if you have government student loans, your tax refunds and wages could be taken away. If you have private debt, the lender could sue you to get their money back.
Consider refinancing
If any of these don’t apply to you, refinancing could be another way to deal with your private student debts. When you refinance, you get a new private loan that pays off your old loans. This leaves you with just one loan and payment.
If you refinance, you can get a cheaper interest rate, which will save you money on interest. You could also choose to lengthen the time you have to repay the loan. This will lower your monthly payments and make your budget easier, but you will pay more in interest over time.
Remember that you’ll usually need good to excellent credit to apply for refinancing. A good credit score is usually 700 or higher. Some lenders also offer refinancing to people with bad credit, but the interest rates on these loans are usually higher than those for people with good credit.
If you need help getting accepted, applying with a cosigner who has good credit could help. You can get a better interest rate with a cosigner even if you don’t need one to get the loan. Note that the person who cosigned will be responsible if you can’t pay.
If you decide to refinance your student loans, you should look at as many lenders as possible to find the best loan for your needs. This is simple with Credible: It only takes two minutes to check pre-approved rates from several lenders, and it won’t hurt your credit score.
Find out if you should refinance.
Check out real rates instead of rough guesses – Get rates from several companies in just two minutes.
Credit score won’t be affected – Your credit score won’t change if you check rates on Credible.
Privacy of data – You won’t get calls or emails from many companies because we don’t sell your information.
Summary points on Student Loans:
- Negotiating Settlement is Possible for student loans in financial hardship, allowing for reduced payments.
- Settlements affect credit scores for up to seven years; tax implications may arise.
- Know outstanding amounts, assess budget, negotiate terms in writing, and fulfill agreements promptly.
- Feasible during financial struggles; federal loans consider hardship, ineligibility for relief, and limited options.
- Private Loan Settlements are Possible with payment challenges, damaged credit, or accounts in collections.
- Refinancing as an Option.
- Platforms like Credible offer secure, credit-score-friendly pre-approved rate checks without data selling.
