Defaulted Student loan settlements

[Anonymous]

I am looking to make a settlement offer on a student loan that has been in default status for many years.  I am unsure wether to try to make an offer to the Department of Education first or go striaght to the collection agency which is servicng the debt.  I am also fearful that if I go to the PCA with an offer that they may use the info. in the offer as a weapon against me to further thier collection attempts.  has anyone any expierence with settlement offers that they can share with me to help guide me abit?.

[Barris]

For Federal Student Loans, settlements rarely happen, if at all. They can just admin garnish you and would not even need a court order to shave some from your paycheck (if you do not have one they can just start taking it out of your SS and tax refunds). Given those facts, why did you not opt for federal loan consolidation?

[SCF]

As Barris said, you aren't going to see many settlement offers on federal student loan debt.  What you may be able to negeotiate are some of the penalties and interest that have built up while it was in default.  My reccomendation is, if you have the time, to contact the collection agency that is currently collecting on your loan and ask to go through the rehabilitation process.  With that process, you will make 9 on-time payments at a "reasonable" rate as determined by you and the CA.  Once that is done, your loan is removed from the default and sold to a loan servicer.  Your ability to borrow more federal loans, and from other federal programs, as well as your right to forberances, deferments and other benefits, is restored.

If you need this dealt with quickly (perhaps because you want to apply for a mortgage or similar), consolidation fixes the problem immediately, but the default status for the old account remains on your credit report.