What Student Loan Debt Settlement Can Provide

A student loan debt settlement can bring significant relief to the lives of former students who unsuccessfully struggle to meet their student loan payment obligations each month. But before attempting to arrange student loan debt settlement, first find out if you qualify for a program that forgives or cancels part of your student loan. Certain civil servant jobs and volunteer organizations - as well as some qualified positions in government or healthcare - may make you eligible for forgiveness of your student loan debt in whole or in part if your income is low enough to meet the program criteria. Taking advantage of any of these programs may obligate you to stay in your field for a specified number of years, but the trade-off is often a substantial reduction in your student loan repayment obligations, or you may be able to get them cancelled entirely.

If you don't qualify for forgiveness or special student loan reduction offers, and you are having difficulty making your student loan payments, you will want to explore student loan debt settlement.


What Student Loan Debt Settlement Can Provide

To start, if your student loan debt is not yet with a collections agency, it is important to keep your expectations realistic and to understand the importance of a cooperative relationship with your lender. If you begin debt settlement conversations by immediately requesting to reduce your loan to a very minimal percentage of the original amount owed, it will be very difficult to get the lender to help you.

For a loan that is current, try making a student loan debt settlement offer in the ballpark of 70% of the original loan total. 70% generally represents the loan principal minus the interest over the loan term. Lenders will not usually be receptive to settling your student loan debt for less than at least the principal amount, exclusive of interest.

Work Directly with the Lender 

For people already struggling to pay their monthly debt obligations, it is in their best interest to try to work out a student loan debt settlement directly with the lender instead of waiting until the lender has brought in the services of a loan negotiator. The negotiator's fee is paid by the borrower and the fee could be difficult to pay for somebody in financial difficulty. Direct negotiation is also preferable to working through a guaranty agency as these agencies also charge high fees.

A successful student loan debt settlement should produce an arrangement that lowers the total loan amount due, and thus lowers the monthly payment. A settlement agreement will most likely extend the life of the loan to further reduce the monthly debt obligation. Even though by extending the term of the loan, you increase the total amount you will have paid in the end, the student loan debt settlement arrangement should relieve the monthly financial burden and make it easier for you to to repay your student loan debt.

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