Community Leader
Valued Contributor
Posts: 1,146
Registered: ‎06-09-2008
Re: Defaulted Student loan settlements

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.