If you have a defaulted federal student loan, you have several options to consider in getting your loan back on track. If you want to settle your loan, however, it is important to understand that you must be prepared to offer a lump sum payment as satisfaction for the total amount you owe. Additionally, the U.S. Department of Education typically requires the full settlement amount to be paid in full within 90 days from the date the settlement is reached. There are certain instances where you may be permitted to pay the settlement in installments as long as the full settlement amount is paid within the same fiscal year.
The government has numerous powerful collection tools and a successful recovery rate on defaulted student loans, so it usually seeks a settlement amount that is at least 115% of the balance remaining on your loan or the amount claimed as due at the time of your default. If the default has occurred recently, however, you may be able to settle for less.
In determining the appropriate settlement amount, the government will analyze how much they are likely to recover from you if a settlement is not reached. This is based upon the amounts they have been able to recover from garnishing your wages and offsetting your tax refunds. As a result, it is beneficial for the borrower to argue that it is unlikely he or she will ever be able to pay back the full amount and the government will not be able to collect in full, even using all of its collection methods.
The majority of federal student loan settlements are negotiated with private collection agencies retained by the federal government to collect their loans. There are three basic types of settlements these collection agencies can enter into with borrowers without obtaining approval from the Department of Education. They are an agreement to (i) waive all collection charges, (ii) pay the current principal balance plus half of the interest that has accrued but not paid, or (iii) pay a minimum of 90% of the current principal and interest owed. A settlement offer that is lower than any of these three standard settlement options must be approved by the Department of Education.
If you have a defaulted student loan, let us help. We can explain all of your available settlement and repayment options. Let us help you find the most advantageous strategy for you in handling your student loan.
For your student loan, bankruptcy, foreclosure, and debtor’s rights matters, contact DeLadurantey Law Office, LLC at (414) 377-0518. We serve the counties of Milwaukee, Waukesha, Kenosha, and Racine, including such areas as Milwaukee, Merton, Delafield City, Waukesha City, and Kenosha. Visit our web site and like us on Facebook.