If you stop making payments on your student loans without first getting a forbearance or deferral from your student loan lender, the lender could assign the loans to a collection agency. When that happens, you may be required to pay back the full amount of the loan, plus extra collection costs and late fees. However, there is sometimes room for negotiation.
Total Amount Due
The first thing to do is to find out the total you owe the collection agency. This is likely to be a different and higher amount than you originally owed the student loan company, because on top of your original balance, you probably also have late fees for late or missed payments, and collection costs from the collection agency. To find out the total amount due, contact the collection agency and ask, or look at any bill sent to you by the collection agency.
Offers from Collection Agency
Sometimes collection agencies will make debtors an offer to make paying back a debt easier or more attractive. If the collection agency assigned to collect on your student loan has made you an offer, read it carefully to see what the terms are. For instance, the agency might offer to allow you to settle the debt for less than what is owed if you pay by a certain date in full or agree to pay in a few large installments. Consider your ability to meet the terms being offered if the collection agency has made you such an offer.
Making Counteroffers
If the collection agency extended an offer that is just not doable, it's better to present a counteroffer than to agree to terms you might be unable to stick to. If no offer has been presented to you, make the collection agency an offer that is reasonable to you. Call the agency and ask to speak to someone about your account. Explain that you want to make good on your financial obligation but are experiencing financial difficulties. Tell the representative what you can afford to pay. If the offer is accepted, ask for confirmation in writing.
What Is Reasonable
Lowball offers are likely to be denied on the spot. However, offering to satisfy only the principal and interest; just the principal and half the interest; or 90 percent of the entire debt might just get you an approval. You may also ask that collection fees be waived or reduced.
Negotiation Tips
Often, collection agencies will take significantly less than what is owed on a debt if you agree to pay in one lump sum rather than making payments for a prolonged period. That's because making payments requires the company to process your payments each month. And there's always the possibility that you will at some point stop making payments. So, if you can, offer a lump sum to settle the debt. Borrow from a parent if possible. While that may seem like a drastic and unattractive measure, student loan companies can take you to court to compel you to pay and even garnish your wages.
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