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Student loans can be very difficult to repay if you have fallen behind and don’t have steady or adequate income. However, only by making an honest assessment you can perhaps make the right decision. If you have private student loans, your choices can be quite limited. You will have to work within the lender’s contractual terms and willingness to work with you as you have taken a private loan.

student loan settlement

Student Loan and Collections

If you are not repaying on schedule, it is quite likely that you will have been sent notices and even loan collectors may have called. Unlike defaulting on a federal student loan, a private loan lender has to sue you. Lenders can also get permission from the court to extract the payment from you. They can garnish your wages or tax returns or freeze your bank accounts or obtain a lien on your property. Even under these circumstances, under the law, you have protection regarding the amount that can be garnished from your wages.

What Can You Do When You Are Faced with Student Loan Collection?

You can consider the following options, if you have been successfully sued by your student loan lender; paying up in full, negotiating a plan for repayment or settling the loan. Which option, apart from a full repayment, will be available to you is more of a choice that will be exercised by your lender than what you yourself want. Read debt settlement reviews online for more clarity on the options.

student loan settlement

Working out an affordable repayment plan is a good option if your lender is willing to cooperate, however, you must never divulge your banking details to loan collectors as they can then withdraw your money to repay the loan on the pretext that you had authorized it. If you can’t repay your loan, you can work out a settlement with your lender. But the settlement is only possible if you have more than half of the due amount, including fees and penalties. Your credit score will take a beating and you will be liable to pay taxes on the amount written off by the lender. Most importantly, only your lender can decide if it wants to settle.

The Importance of Negotiation and Documentation

Normally, lenders will not want to settle for anything less than the amount due unless they are convinced that you are truly incapable, not just unwilling, of paying the debt back. While it is perfectly okay for you to discuss and negotiate the terms of the settlement with the lender. For getting better terms please hire a specialist lawyer. Also, the lawyer will be able to ensure that the agreement arrived at with the lender is watertight, and there is no possibility of you getting sued later.

student loan settlement


Defaulting on a student loan is never a good idea and try and keep your repayment record intact. If you do fall back due to unexpected circumstances, try to work out a revised repayment plan. Take the help of a competent lawyer if your finances are so dire.