Types of Student Loan Settlement Negotiations
When you have a problem such as student loans, you are not alone on this one. But, you still have options.
So how will one be able to negotiate student loan payoffs? Below are some tips that will help to increase your chance to get the most favorable result. You could read more here to learn more about your options.
Never Wait Until Default to Negotiate
You can actually avoid student loan settlements when you take preventive measures before the loan goes to default.
Through a federal loan, defaults mostly starts after you have gone without making any payment in a year. With the private loans, you can actually go into default when you have not made any payments within 90 days.
Instead of having the default deadline the limit of your choices for negotiating a student loan payoff, consider talking with the lender first with regards to options like consolidations or refinancing, deferment or forbearance and income-driven repayment plans.
With income-driven repayment plans, when you qualify, you can get a cap with the monthly payments and get relief on the interest.
Through deferment or forbearance, you will be able to temporarily reduce the payments or perhaps temporarily stop to making them.
In a consolidation or refinancing, the former involves the case of combining balances on the multiple loans to just one payment and the latter involves looking for favorable interest rates as well as repayment terms.
With a pre-default opportunity, it will vary based with the situation that includes whether you have a federal or private loan. Be sure to check on the terms of the loan agreement before you contact the lender.
Talk about Hardship Programs with the Lender
For most of the time, a student loan settlement is an option only for borrowers that have exhausted already their payment reduction and postponement program that was being offered by the lender. For the federal government, it includes income-driven repayment plans, graduated and deferment and forbearance options, that are also being offered by most of the major private lenders.
Types of Settlement Offers
A student loan settlement is mostly possible only in situations to where the borrower could offer a lump sum. Collection agencies actually are authorized to only accept three kinds of settlement offers without getting approvals coming from the Department of Education. These settlements are:
The amount remaining loan principal as well as accrued interest.
The principal as well as half of the unpaid interest.
The 90% of the current loan and its interest balance.
Settlements not fitting with one of such categories are very uncommon. It could however take longer because the Department of Education still needs to do reviews about it.
Consider a Request for a Paid-in-full Statement
When a settlement is possible, be sure to have the attorney review the terms of the offer as well as to request documentation which shows that all the student loans were paid and settled.