Hi everybody, I’m currently dealing with $103K of private loan debt (plus another $23K in federal loans) My cosigner on two of my largest loans just ended a bankruptcy at the beginning of the year, so those loans now have monthly payments due at around $1,000 together. I have been continuously paying a fourth private loan at $400/month cosigned with another family member, plus my federal loans in IBR at $250/month.

Needless to say, the $1K/month increase is not in my budget. After doing a lot of research into refinancing (no available cosigner, plus no guarantee of affordable payment terms), it looks like I am on the verge of default on these two loans, with payments past due that I just don’t have. I got in touch with a law firm who handle settlement negotiations with student loan debt, and they don’t seem to be a scam - I am seriously considering going this route.

So, a few questions:
Is debt settlement for student loans a legitimate practice that you’ve heard of?  I have had a hard time finding testimonials in my online research from other people who have reached a successful settlement with legal representation.  This lawyer seems trustworthy and knowledgable and has met with me twice to answer questions in detail - yet I still have a nagging feeling that taking this big step could be a huge mistake and blow up in my face.  He is charging a flat fee of $3,500 to reach a settlement on the total $103K private debt (I will continue to keep my federal debt in IBR, as the payments are affordable and I understand defaulting on federal debt is a huge mistake).  He has said that he routinely reaches settlements 50-70% lower than the starting debt amount, affordable monthly payments at zero interest, etc.

Does anyone have experience with using legal services for this?
Or if anyone has negotiated a settlement with private lenders without legal help, any insight on the process would be helpful.

Thanks!

I don’t know if you can hire Heather for help like that - she is a former attorney, but I’m not sure if she provides those services.

You might listen to this So Money podcast with Jay Fleischman to get an idea of the options out there. I would research several difference lawyers before I made a decision.

-Biglaw Investor
http://www.biglawinvestor.com/

Whoops, sorry - here’s the link to the podcast:

http://podcast.farnoosh.tv/2016/04/jay-fleischman/

Most of the debt consolidation firms provide free debt counseling service to debtors willing to consolidate their bills and debts. The counseling session allows you to determine your situation and discuss your options to get financial freedom with a debt consultant. This is to make sure that you know what’s best for you.

Hey Michael,

I’ve been struggling with the same question. I’ve spoken to some debt settlement companies, but no lawyers. So far they have been pretty expensive and can’t really guarantee their services. Some want monthly payments for their services and one wanted 10% of the total debt amount as their fee. As a non-practicing attorney, I did some research on the Consumer Financial Protection Bureau’s website as well as on my local State Attorney’s website. Both say to try a credit counseling or settlement non-profit. I just made an appointment with studentloanborrowersassistance.org, but I haven’t actually talked to them yet. I’ll let you know how that goes. I am also looking for an attorney to discuss this with. I’m in Miami, FL, and I’d like a local attorney, but I’m having trouble finding any that negotiate debt settlements and that have a good track record. Many of the firms I find when researching are bankruptcy attorneys and I already filed for bankruptcy and my loans were not included. I think I may have had a good argument, but my attorney was inexperienced. Anyway, if you or anyone has someone good to recommend, please let me know. I’ll tell you how the non-profit goes. You might want to try them too. The consultation is free.

Good luck.