Available Options to Reduce or Settle Your Student Loan Debt

Student Loan Debt: Your Options to Reduce or Settle Amounts Owed

Today’s job market requires more specialization and higher levels of education. The increased need for education combined with tuition rates outpacing inflation has resulted in 70% of college graduates taking out student loans to pay for their college degree.

Will high debt levels at graduation, nearly a million former students each year struggle to keep up with loan payments. In 2018, 11.5% of borrowers were delinquent by 90 days or more. If you find yourself struggling to make on-time payments, there are options to settle student loan debt, which include the following:

Federal Student Loan Debt Settlement Options

Federally backed student loans have a range of benefits to prevent default, including income-based repayment plans and generous options to get back on track. The government also has significant power to collect on a delinquent debt, making it less willing to settle defaulted accounts.

Students with federal loans can also qualify for loan forgiveness programs. Popular programs include:

  1. Working in public service for ten years
  2. Remaining in an income-based repayment plan for 20 or 25 years
  3. Death or permanent disability

Find a complete list of loan forgiveness options here.

Debt Settlement Options

Federal student loans offer limited reprieve through debt settlement. In cases when you can settle federal student loans, you must meet the following conditions:

The loan must be in default, which means failing to make a payment on the debt for 270 days or longer.

You must accept one of three settlement options, which include:

  1. Repay the entire principal balance plus unpaid interest, with collection charges waived.
  2. Pay the full principal balance and half the interest, with half the interest charges waived.
  3. Pay 90% of the outstanding balance, which includes both principal and interest.

Make a lump sum payment. In most cases, you must pay off the full balance within 90 days of the agreed settlement date.

Given these limited options, most borrowers are unable to settle federal student loan debt for less than the full balance.

Private Student Loan Debt Settlement Options

Private student loans resemble traditional loans in qualifying, loan terms, and repayment options. These loans also resemble other forms of debt, when considering debt negotiation.

Lenders are unlikely to work with borrowers who remain current, giving borrowers in default a negotiating advantage. Lenders are more willing to negotiate if there is a clear indication of financial distress shown through late payments. Private lenders also have fewer resources to collect on the debt, which is essentially an unsecured loan.

Statute of Limitations (SOL)

Private lenders must abide by the state’s statute of limitations, which restricts the time in which the lender can sue the borrower. Depending on the state, the SOL can be as short as three years or as long as 10.

NOTE: Federal student loans do not have a statute of limitations.

After the statute of limitations expires, a creditor can still make efforts to collect the debt but cannot sue in a court of law.

Settlement Options

Private lenders can agree to a lump sum payment or an installment plan based on your ability to repay the debt. These options can significantly reduce the amount you must repay to settle your student loan debt.

Final Thoughts

Private student loans offer a range of debt settlement options for former students struggling to keep up payments. On the other hand, federal student loans offer a wider range of options to prevent default, but fewer choices to eliminate the debt through debt negotiation.

About Titan Consulting Group

Titan Consulting Group helps consumers evaluate various debt relief options and choose the right program that best fits their short-term and long-term financial goals. We work with consumers seeking debt consolidation loans, or who may be considering options like debt negotiation or bankruptcy. Through our network of partners, we can help you find the right solution to reach your goals and get back to living a life free from high interest credit card debt.

Contact us today at (888) 488-4517 or Apply Online now.