Student Loan in Collections

[Anonymous]

I had a private SL through Sallie Mae enter into collections awhile ago. Recently I received a phone call from a CA wanting to settle this debt for a pretty reasonable amount and I was a bit skeptical so I agreed to pay them monthy for 9 months or so. I wanted to research and try to get some answers before calling them back and agreeing to the settlement terms which they said would be possible at anytime. So my question is. When and if I do settle how does that appear and affect my credit scores? Over the past months I have paid all of my credit cards off and this is the only negative that I have currently. Will it read settled? Or paid in full? And since the loan has aged quite a bit will this have any negative drawbacks? I really have no problem paying this debt back or off I would just like some info before making a decision to pay them over the long haul vs a settlement. Thanks.

[Anonymous]

I just posted about a similar issue. If you have the means to pay it off, I would consider it. The same thing happened to me, and now I'm having trouble getting a government-backed mortgage, even though I've been making my payments on time to the collections agency. Make sure that the CA collections agency can provide you with written documentation of the origination of the loans. They probably will have tacked on a ton of fees, so the faster you can pay it off, the better. Good luck!

[Anonymous]

Since it’s a private SL and the account is in collections your options might be limited.

Before you agree to settle I would look into the following:

1. See if there’s an option to rehabilitate the loan. If you can this would be your best option it will get the loan out of default and help your credit.

2. Check to see if you can consolidate, this will also take the loan out of default, but your credit will still be damaged.

If the only option is to settle I will see if the collection agency will agree to do a PFD (Pay for delete), if they agree what will happen the negative information from Salle Mae will remain but the information from the collection agency will be removed from your credit report. Make sure to get everything IN WRITING when dealing with the collection agency.

If you settle the loan I don’t think it will be shown as paid in full.   

The big problem with having a student loan go into default is that even if you pay the collection agency in full the default status will remain on your credit for 7+ years, this is why I recommended looking at option 1 and 2 first.

[Anonymous]

I spoke with the CA earlier today to ask them about this directly. I was told if I settled of course I would be no longer liable for the defaulted loan. They went on to say that they will be doing a "pay to delete" and the account will show paid in full from the original lender. With all of that being said there was noway I could turn it down and have settled this account. Ill try to update the post once all payments are made. Thanks!

[Travis-84]

Did they agree to all of that in writing?  I would hate for you to make the payments, and for them to 'forget' that they agree to a PFD, or something like that. 

[Anonymous]

They are suppose to mail it to me asap with the agreed upon terms.