Settling student debt is challenging relative to other forms of private debt because of the special protections afforded such loans by federal legislation. Unlike most other forms of debt, the law prevents student loans from being discharged in bankruptcy. Despite this, private lenders are often willing to settle student debts for less than the total amount owed. Federal and state student loan lenders are unlikely to provide settlements, but many offer loan forgiveness programs for those willing to work in certain jobs, volunteer for Americorps or work for the National Institute of Health in a research program.
Instructions
- 1
Find the contact information for your lender on your monthly student loan bill. In most cases, you may not be able to settle your debt unless the loan is already delinquent or in collection. You may only be able to secure an agreement to reduce the principal by a small portion or reduce the interest rate. Prepare a reasonable settlement offer to the lender. Expect to need to pay 30 percent or more of the outstanding loan to settle the debt. If the debt is already in collection, it will be easier to achieve a reasonable settlement.
2Contact the lender and make the initial settlement offer. Before sending any payments, request that any agreement be mailed to you in writing for you to sign. You may also want to request that the lender cease all attempts to collect on the debt. Many companies will collect aggressively on student loans, seizing assets and garnishing wages. Ensure that any settlement agreement has a clear deadline by which you are required to send payment.
3Review your new agreement with the lender. Send payment as requested before the contractual deadline elapses.
4Review your credit reports from the three major credit bureaus (TransUnion, Equifax, and Experian) via the company websites to ensure that the debt has been properly marked as settled. Ensure that you receive confirmation from the lender after you provide the settlement payment.
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