No one takes out student loan debt expecting they’ll have trouble paying it later. In fact, most borrowers go into college expecting a good job to come out of it. You put in all that hard work, and then what? Sometimes, plans don’t work out as intended. Life gets in the way, as well as the economy and other factors.
Currently, 44 million Americans owe over $1.53 trillion worth of student loan debt. That’s the second highest debt out there today. The worst part is, the debt keeps piling up. Every year, more than one million students go into default when they can’t pay. To go into default, you have to miss over a year’s worth of payments.
Going into default is a nightmare for anyone with student loan debt. Even though you’re not paying, the interest continues to climb. That means the total you owe grows with each passing month. Not to mention, your credit takes a massive hit. If you had hoped to buy a house or get a new auto loan, think again. Going into default cancels all of that out.
If you think bankruptcy is the answer to solving your student loan debt problem, think again. Only in extremely rare circumstances will it be discharged for that reason. This is one debt that if you owe, you’ll have to pay it back regardless of your circumstances. But, there is one option that might help you.
Can You Settle Student Loan Debt?
While bankruptcy and other sorts probably won’t happen, you can settle your student loan debt. A word of warning: we are not saying to do this. We’re writing this article as a last-ditch possibility that may not even happen. So, what does it mean to settle your debt with the lender? It’s really about negotiation.
If you’re way over your head and deep into default, you may find that your lender is willing to talk. If it becomes obvious that you’re not going to pay your bill, the lender may decide to settle. To settle your student loan debt means that you can reach an agreement with the lender to take less than the full amount.
Lenders might get desperate to get some of the money back. This isn’t the same as student loan forgiveness or loan discharge. This is a unique and special deal the borrower and lender will make to get the student loan debt discharged. There are a few incidences of president where this has happened before.
Typically, the debt has to be in default. If you’re paying on your student loan debt, then the lender has no reason to do this. They’re getting their money back with interest. If you’re not paying and you’re deep into default, that’s a different story. They will do what they can to get you to start paying again.
“If you’re making payments on your loan, and everything is in good standing, you’re not going to be able to just call your loan servicer up and say, ‘Hey, will you take 50 percent?'” says Adam S. Minsky, an attorney specializing in student loan debt.
How to Obtain Debt Settlement
The best way to do anything about your student loan debt is to contact your loan servicer. If you’re deep into default, you might think that’s the last thing you want to do. But they hold all the keys and will ultimately make the decision to lower your balance. At the end of the day, going into default and avoiding the problem won’t help you.
http://financialhelpers.com/the-next-big-u-s-financial-crisis-may-be-caused-by-rising-student-debt/
Despite who your servicer is, your loan is owned by the federal government. They have a handful of pretty powerful tools to make sure you pay them back. They can garnish your wages, take your tax return, and more. Your servicer can also pass your loan off to a collection agency and revoke your driver’s license!
It’s never worth it to go into default. If you’re struggling to pay your student loan debt, call the servicer and make a deal. Ask them about a settlement and negotiate it to something you can pay.
