(sorry…I did not mean to post this here…I also posted this above)

I was in the process of negotiating with my loan holder for a monthly rehabilitation amount when they apparently grew frustrated with the process and started garnishing my wages.

That is not related to my question however.

I have made contact with a relative who may be willing to pay off the loan in full. His question and my question is this: Do holders of defaulted loans ever accept a lower amount than the total?

If so, is that something that is best negotiated by a lawyer with student loan expertise?

I did some research in the past and was able to locate only one lawyer in my entire state with such expertise. His office is hours away. If hiring a lawyer is prudent, do I need to hire one in the state where I reside?

The loans are held in another state, by the way.

I used a lawyer in the past to try to resolve another student loan situation and his lack of expertise in the field was a significant problem from my perspective.

Hello Steve.  My name is James and I am Heather’s Communications Director (and husband).  I’m sorry you are facing this situation, but unfortunately it is becoming more common.  The first thing to do is gather up all the info on your loans to ensure that you have a complete picture and know definitively who owns all of your student debt.

Go to the National Student Loan Data System to inventory any federal student loans (http://www.nslds.ed.gov/nslds_SA/).  To access NSLDS, you will need a PIN issued by the Department of Education that you can get here: http://www.pin.ed.gov/PINWebApp/pinindex.jsp.  Download a free copy of the credit report to inventory any private student loans you may have.  You can do that here:  https://www.annualcreditreport.com/cra/index.jsp.

For federal loans, loan cancellation can help a few borrowers, and you ought to double check whether any of these circumstances apply to you: http://www.studentloanborrowerassistance.org/loan-cancellation/  Consider the pros and cons of rehabilitation or consolidation to get out of default.  The best resource we know of for you to learn the steps is: http://www.studentloanborrowerassistance.org/default-and-delinquency/repayment-get-out-of-default/.  And you’ll find information about the wage garnishment issue here: http://www.studentloanborrowerassistance.org/collections/government-collection-tools/admin-wage-garnishments/.

A few more things to think about if any of your student loans are private loans.  Private collectors do not have as many collection tools as the government.  There is a time limit for collection.  The limits are different in different states, but tend to be around six years after default.  An attorney in your state could research the statute of limitations there.  Often private lenders will hire collection agencies.  Borrowers have certain rights to fight back against any harassment or abuse by collection agencies.  Collection fees for private loans should be listed in the loan agreement.  There may also be other laws in your state that limit the amount of collection fees that private creditors can charge.  The main thing the private lender can do is sue in court.  As you mentioned, some private lenders may eventually negotiate a payment plan or debt settlement.  IF you have access to a lump sum of money (from your relative as you mention ed), there may be some possibility of settlement of private loans: http://www.studentloanborrowerassistance.org/default-and-delinquency/compromise-settlement/. 

In terms of finding an attorney who specializes in consumer law in your area, Heather is a member of the National Association of Consumer Advocates, and that’s the place to look.  You can find them at http://www.naca.net/find-attorney.  You mentioned that the loans were originated in another state, but it’s best to start with an attorney in the state where you are a legal resident and then go from there.

Our hope is that over time, borrowers will have more options, but for now these are your best bets.  Sorry for the long e-mail; I hope this helps point you in the right direction.

With kind regards,

James Jarvis
Communications Director
Heather Jarvis, Student Loan Expert LLC

Thanks for the quick reply, James. I have actually already done most of what you posted here. Do you think Heather might be able to answer the specific question I asked, regarding settlement? Let me know. Thanks again.

It is possible to settle defaulted loans for less than the total balance, but lenders are not known for their willingness to negotiate borrower-friendly terms.  Check out this information: http://www.studentloanborrowerassistance.org/default-and-delinquency/compromise-settlement/

I think that people who are represented by qualified attorneys tend to get better settlements than those who are not represented, but of course then you’ve got the lawyer’s bill to pay and who knows if that’s worth the price?  It depends.  Wish I could be less wishy washy but giving it to you straight.

Thanks, Heather. I did manage to negotiate a lesser amount on my own, amazingly. Now I have another question. The guarantee agency sent me a simple letter outlining the terms of the settlement and a deadline date for sending the money. What else would you suggest I request from them? I am guessing a letter saying that there are no other obligations and all amounts are paid in full, etc., would be a good idea. I don’t want anyone coming back at me years later demanding more money. What would you suggest?

Hi Heather,

I am attempting to find the correct individual to try to negotiate a lump sum settlement. My servicer is Navient.  Hand a wage garnishment of 11 years where they collected $75K including $14k in collection fees.  I am now 61 years old and will work only a few more years.

I am 263 days past due in payments and my calls to Navient are sent to the ” collection” person. She said the loan will go into default status ” any day now ”    I am wasting my time trying to negotiate a settlement of 50% of the debt ($93k) ??

She also said they do not negotiate….  My note holder is USA Funds.  How to I get to the right person to negotiate
a settlement ?  I am having a very difficult time getting in touch with a person to discuss that.  I am a lawyer who failed to get employed in my field.

Any ideas?

Thanks