How to Negotiate Lower Student Loan Payoffs

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Long after you have finished school, debt from a student loan can hang over your head. If you are concerned that you won't be able to keep up with student loan payments, it may be time to renegotiate. If you don't have much experience in negotiating, you can learn how to talk to creditors to determine if they will help you reduce your payoff amount.

Call your creditor first. Don't wait until you are several payments behind and receive a notice in the mail. Be proactive and contact the creditor when you first suspect you are going to fall behind on payments. It will be much easier to negotiate if you are in good standing with the creditor.

Ask for a lower interest rate. This is the easiest way to reduce your payoff amount. If you can get a percentage point or two taken off your interest rate, your actual payoff amount will be much less. Call your creditor and explain that you want to continue making payments and honoring your debt, but you would appreciate a lower interest rate so that your payoff will be lower. The creditor is under no obligation to comply, but if you suggest that the lower rate will enable you to make payments, the creditor may think that getting a smaller rate of return is worth avoiding a default.

Ask for smaller payments. This will not reduce your payoff amount, but it may allow you to get into a financial position where you will be able to make larger payments at a later time. Explain your strategy to the creditor; it may seem attractive. This would be especially true if your education has prepared you for a high-paying job and you have some prospects.

Offer pennies on the dollar. If you truly cannot pay, a creditor may prefer to receive partial payment than no payment. Call the creditor and ask if you can pay half the loan instead of all of it. You may end up negotiating for three-fourths of the principal amount. Ask that your minimum payments be reduced proportionately.

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