Everything You Need To Know About Private Student Loan Settlement
The best way to eliminate college debt is to pay down your student loan debt, unless you qualify for student loan forgiveness. Insolvency and foreclosure do not resolve the problem.
Perhaps you should consider intentionally defaulting on your student loans to see if you can settle for less than you owe. Debt settlement companies can assist with this process, too, as they can with other types of debt.
In the case of private student loan settlement, strategic default is an unwise choice. Discover why.
Defaulting Won’t Solve The Problem In The Long Term
You typically have to deal with a collection agency if you have defaulted on your student loan payments. Collection agencies are allowed to offer three types of Strategic default private student loans without prior approval from the Education Department:
- We do not charge a collection fee
- Because you defaulted, half the interest will be waived
- Due to your default, you will waive half of the interest
Keep up with your loan obligations instead of choosing these options; they are not more cost-effective. If you default on your student loan, you can be charged a collection fee of up to 25% of the principal and interest.
The savings from reducing your principal and interest by 10% would be negated by any collection charges.
Defaulted borrowers with loans that have been late for ten years or more are the most likely to benefit from a student loan settlement because the settlement discounts accumulated interest. However, the Department of Education will not accept any payment less than the original loan balance when the loan is in default.
Borrowers who are currently making payments on their loans cannot save money by defaulting on their loans.
A collection agency who reports a past-due account to the three major credit bureaus can ruin your credit if you default on your student loans. I hope you won’t need to borrow money again for a while since the interest rate is likely to rise in the near future. You may not qualify for a loan if you have a poor credit record.
Your financial loss is likely to increase if you don’t make regular payments.
Defaulting On Student Loans Is The Most Effective Method
There are some better options to consider if you find it difficult to make your current monthly payments.
Students Who Need Help Repaying Student Loans Or Who Want Their Loans Forgiven
You might be able to pay off your student loans with the help of the government, states, and localities. Whether you get help paying down your debt or outright forgiveness, a large amount of debt may be eliminated in a relatively short period of time.
When Planning A Repayment, Consider Income
Your monthly payments can be reduced with an income-driven repayment plan from the U.S. Department of Education. According to the income, family size, and state of residence, a percentage of your discretionary income will be paid to you.
The income-driven plan allows you to have a longer repayment period of 20 or 25 years before the balance is forgiven.
Refinancing Student Loans Is An Option For Students
Refinancing student loans may lower a person’s monthly payments, interest rate, or both if they have excellent credit and a steady income.
You may lose out on forgiveness and income-driven repayment programs if you switch from a government-backed loan to a private-lender-backed loan.
In addition, if you refinance with a lender that charges variable rates, you may incur higher costs in the long run. A fixed rate mortgage may be an attractive option if you are contemplating refinancing.
