I've reached a fork in the road. Which way to go?

[Anonymous]

I have about $60,000 in student loan debt owned by Navient that is in default. The way I see it, I have two options.

One, I could rehab the loan and enroll in a payment plan. This would make me eligible to receive the Pell grants I am eligible for this semester and next as I am finishing up the education I resumed. I think it would also be the better option for my credit. The downside is, I think I will pay a lot more money for the loan in the long run by doing this.

Two, I could just let it sit in default for another two years, at which time I am going to come in to some money, and offer to settle for half in a lump sum payment. The good news is this is a lot less than I would probably pay otherwise and I could simply be behind it in just a couple years. The down side is my credit will continue to be poor for two years, plus be affected by a debt that is listed as settled instead of paid in full. I would also not get the Pell grants.

I would appreciate any guidance and direction you might offer. Thanks!

[SCF]

If these are federal student loans they will be very unlikely to settle for half of the debt.  These loans have no statute of limitations, and they do not have to get a judgment to garnish your wages, seize your tax returns, and they can even attach your Social Security if they hang around that long.  The reason a private lender will negotiate is because securing and acting on a judgment before the SoL expires is expensive and sometimes impossible, making a settlement more profitable.  That is not true with federal student loans.

For private loans, this strategy may work, or it may not.  It really depends on how close the loans are to the SoL, and to what extent this money you plan to receive might be accessible through a judgment.  If they sue you and win before you can settle, then they have the upper hand and you will pay the full amount one way or another.  Also note that private loans are not eligible for rehab.

[Anonymous]

I would not recomend the rehab because it can be very expesive based off of your income and still may not work. You can consolidate your loans with in 2-6 weeks, this will remove default status, tax off set and give you a new payment that you can afford. Once the default status has been lifted you will be egilble for more student loans with in about a month.

http://www.defaultedstudentloanhelpnow.com/#!income-based-payment/cnqt