Sidestep your student loan payments - Debt settlement shouldn’t be a slam dunk choice

Have you considered debt settlement for your student loans?

If you’re someone who has defaulted on his federal student loan debt, or gone without making payments for at least a year, you may feel that you don’t have any other option but to drown in debt. But did you know that you still have the choice of settling your debt with the collection agency to pay an amount which is less than what you owe? Well, if you’re a grad who is looking for ways to sidestep his student loan payments through a debt settlement option, you’re off to a tough road! Unlike credit card debt and personal unsecured loans, private and federal student loans can’t be discharged through bankruptcy, according to the US Department of Education. Since student loans are tougher to shake off than all the other kinds of debt, there could be remedy for those who are fiscally snowed under by student loans. Read on the concerns of this article to educate yourself on some facts on student loan debt settlement.

How about considering an income-based repayment plan for student loan debt settlement?

Is an alternative affordable repayment plan all that you want? If answered yes, how about considering the income based repayment plan? Through this plan, the monthly payment will be calculated on a percentage of your discretionary income. This is the amount, by which the adjusted gross income surpasses 150% of the poverty line. For most borrowers, this is the most affordable option as it is based on the income of the student and not on the total amount that you have borrowed. In case your income is less than 150% of the poverty line, the monthly payment will be based on the income based repayment plan.

Debt settlement for your defaulted student loan debt

If you wish to settle your defaulted federal student loan debt, you should be able to make a lump sum payment to pay off a major portion of the balance of the loan. A compromise offer will demand you to pay back the settlement amount entirely within a span of 90 days. There are some common circumstances where the defaulted borrower will make a lump sum payment like obtaining an inheritance, winning a lottery and getting a big bonus at work.

The key to obtaining a good debt settlement deal is knowing the available options for settling your debt with the collection agency. The US Department of Education appoints the private debt collection agencies to make different kinds of debt settlements without getting prior approval.

1. Waiving off or eliminating all the collection charges and the borrower pays the present principal amount and the accrued interest rate
2. Payment of minimum 90% of the present principal and interest rate
3. Payment of the present principal balance and half of the  accrued interest rate which is still unpaid.

In case you’re someone who has offered an amount which is less than the aforementioned compromises, the collection agency will require getting approval from the US Department of Education. This is a reason why non-standard compromises aren’t much common. 

Calculating the compromise and minding the taxes

When debt settlement is the only option, the students should prove that the collection fees and the interest amount have burgeoned so rapidly that it’s impossible to pay back. Once the lender agrees, you should make it within 60-90 days. Once the settlement figure is decided, you have to check the tax implications too. Any debt that is forgiven is subject under tax and therefore the borrower has to make sure he knows this liability of his.

Therefore,when you’re saddled with federal student loan debt, you can take resort to debt settlement in collaboration with the debt collection agencies. Get everything in writing and make sure you repay 100% of what is paid.