Last Updated on
Settling private student loans is possible, but it may not be as easy or as quick as you may expect.
Despite the difficulty, it is always a good idea to try and settle private student loans because they cannot be settled via bankruptcy. A settlement will probably be your only option if you are having trouble paying off your student loan.
What is Debt Settlement?
Debt settlement means that you work with the lender to find a way to get the loan paid off. Lenders prefer debt settlement because it means less cost, less hassle and less paperwork for them.
Most private student loans involve settlements where the payment of a lump sum that amounts to less than the original loan. Lenders will go along with such a deal because they believe they will at least get something back.
This means you will have to come up with some cash upfront. You might have to use savings, sell something or simply borrow the money. There are many private lenders that will advance money to those who are deeply in student debt.
A good example of this setup is a debt consolidation loan in which a lender will settle all of the borrowers’ obligations. This can be a better deal for some borrowers because they will have only one payment to make and only one lender to deal with.
Debt Settlement Companies
Debt settlement companies are private organizations that work with lenders to settle unpaid private student loans or bills. You should research these companies carefully before signing up with one because not all of them can do what they claim.
Part of your research should be locating a debt-settlement company with experience in private student loans and debts specifically. Student loans are very different from other kinds of loans, and not every company is experienced with them.
A great place to read reviews on these debt consolidation companies is solvable.com. This one website can give you all the information you’ll need to make an informed decision.
Debt Consolidation and Student Loans
One big advantage of dealing with a debt consolidation company is that it gets the student loan debt off your record. In the United States debt from private student loans is not dischargeable in a bankruptcy; it can come back to haunt you later on.
Future income including wages, business profits and even social security can be garnished to collect unpaid student loan debt under U.S. law.
This is why debt consolidation can be a really good move for debt burden students, even though it can lower your credit score and lead to a higher tax bill. Unfortunately, the IRS considers debt repayment “income” and will try to tax you on it.
Need More Help?
Student loan problems can be very hard to sort out, so you may need help from a professional.
Make sure that you consult with an expert in the field, particularly one that works with a debt consolidation company. Taking advantage of their expertise can help you get out of student loan debt and get on with your life.