How to Make a Settlement on a Student Loan
With college being a virtual requirement to enter the workforce, many people are saddled with thousands of dollars in student loan debt. Being in this situation means you'll be spending the next 10 or more years of your life paying a significant portion of your salary towards your student loans. Unfortunately, as is the case with most forms of secured debt, settling your student loan debt for less than what you owe is very difficult, and the damage done during the process makes a settlement very prohibitive. However, settling your student loans isn't impossible.
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Instructions
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Save up as much money as you possibly can in preparation for a potential settlement. Student loan settlements are generally done in a lump-sum payment. If you don't have money for a settlement, try to simply get back on track with making your loan payments. Don't intentionally skip your payments to save for a settlement, as there's no guarantee the lender will settle with you.
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Look at your student loan payment history online and make sure there aren't any mistakes. The lender is required to correct any mistakes, including any interest charged to you as a result of their errors. Doing this can bring your loan balance down, thereby helping you when it comes to a settlement.
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Contact your student loan lender and ask what it can do for you. Start with a 10 percent reduction on your loan balance, but be willing to come down from that number. Most student loans aren't settled for anything less than the principal of the loan and settling a loan without being in default is extremely rare, so take anything the lender gives you. Get everything in writing as soon as possible.
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Tips & Warnings
Most student loan lenders offer forbearance and deferment programs to those facing financial hardship or life changes. Use these avenues before falling into default or attempting a settlement.
Student loan settlements are extremely difficult to achieve and generally require the lender to give up on your ability to pay the loan back. If the lender has any reason to believe you can make good on your loan, it won't settle. If it does settle, your credit will be in ruins, you'll owe a large lump-sum payment and you'll owe taxes on any forgiven principal. Be very sure you want to pay these penalties before settling, because the bad may outweigh the good.
