Student Loan Debt Settlement Mistakes

Student loan debt settlement mistakes can cause people to re-negotiate settlements or pay more money. Student loans are given to students to finance their education. However, the loans must be repaid whether or not students obtain degrees or lucrative careers. Typically, people seek student loan debt settlements to avoid wage garnishments, the blockage of professional licenses or garnishments of Society Security benefits. However, people can make mistakes before negotiating student loan debt settlements. For instance, lenders don't always have the correct information regarding student loan amounts. Thus, people should make sure lenders have the correct payment history. According to Bankrate, lenders errors can add from five to 20 percent to people's outstanding debt.

Mistake: Not Paying on Time

The U.S. Department of Education expects to receive the debt settlement payment within 90 days of the date agreement was made. If the Department of Education agrees to allow people to pay a lump sum payments and a series of monthly payments, the payments must be paid with the single fiscal year. The federal government's fiscal year runs from October 1 to September 30, according to The SmartStudent Guide to Financial Aid called FinAid. Thus, people can get in more trouble by not sending payments in on time.

Mistake: Paying Additional Money

It's easy to get caught up in student loan debt negotiations to ask questions if there are any tax implications. Typically, student loan settlements may come with additional debt. The Internal Revenue Service (IRS) considers any part of the debt lenders forgive as income. Let's say, lenders agree to settle for $11,000, according to Bankrate, students will be bumped into the 30 percent tax bracket and will be responsible for paying about $3,000 in taxes.

Mistake: Not Getting the Settlement Offer in Writing

Student loan debt settlements are great and binding when they are on paper. People often make the mistake in thinking the verbal settlement agreement is all they need. However, people must make sure that they have the offers in writing. Also, the settlement offers should include that paying the payment should satisfy the debt. In certain instances the settlement payment won't eliminate the student loan debt. For instance, if people have private and federal loans with one lender the payment may only settle one student loan debt. People working with debt collection agencies may be mislead about settlement payments wiping out the student loan debt.

Talk to a Lawyer

Need a lawyer? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
Get Professional Help

Talk to a Debt Settlement Lawyer.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you