Hi, I am new here. I am in a pretty bad place financially, and have never been good with money (was never taught) so I am trying as best I can to educate myself now so I can somehow pull myself above water. I have $48,000 in private student loans that are currently in collection. I spoke with a collection representative today who offered me a settlement of $22,000 or possibly lower if I make an offer. I would like to do my research before making any decisions. I am currently working as a 1099 freelancer, and make roughly $30-40k. My credit score is already extremely low (500) so I am not sure if I should be concerned with a settlement lowering it further. I am mostly concerned with the associated income tax that I have been reading might be applied to the amount that is forgiven. If I am doing my math right, and I could be paying income tax on the $26,000 amount forgiven. My main question is whether I could be considered "insolvent". I do not own any assets - I rent an apartment, lease my car, and have no other retirement or investment funds. My liabilities are this loan, a federal student loan (approx $10k) and $1k in credit card debt. I am literally at the bottom of my financial barrel and having $26k + in student loans forgiven without being taxed would be life changing for me. Any advice or information is greatly appreciated. Thank you!
Get rid of this debt any way you can. With a score in the 500s, I wouldn't worry about the score. It will recover as long as you pay your debts.
As far as the implications on your income tax, check out this article;