05/28/2013 03:39 pm ET Updated Dec 06, 2017

I Got a Debt Settlement Offer on My Private Student Loan

Huffington Post Reader Question

Dear Steve,

My private student loan went into default after a period of unemployment.

I have filed chapter 7 bankruptcy. I know that student loans are not dischargeable through bankruptcy and my account was recently turned over to a company.

They offered me a settlement, but I was uncomfortable with the payment amount. I came back with a counter offer but they declined. I ended up accepting settlement offer anyways (which I received in writing).

The original agreement was for me to send a large payment (14%) initially and then follow up with 12 months of payments to settle the debt for a total settlement of about 45%.

I sent them the initial payment last week. They have not received it yet.

Today, I received another settlement offer for a settlement that is significantly less (20.4%). I called them and asked about it and the person assigned to my account said to follow the better offer letter as it is in writing and is final.

Should I trust them? Is the most recent settlement offer final? I would hate to follow this new offer only to have them withdraw it and out my account back into default.


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Dear Jen,

Congratulations on getting a settlement offer on your private student loan. Not everyone gets one but more appear to be going out these days.

I'm not surprised you received more than one offer. I knew someone once that owed a major credit card company. They called the credit card company and made an offer to settle their debt for 45% of the balance. The company said no way. That night he got home and in his mailbox was a settlement offer from a different department of the same company at 20% of the balance.

It just goes to show you that one hand does not always know what the other hand is doing at large companies. It looks like your situation just triggered different letters and offers for some reason.

The second offer is obviously the better one. But before you accept the offer you should become familiar with the pros and cons of debt settlement. You need to clearly understand what your tax liability might be, if any, for accepting either offer.

If the second offer is in writing and you can comply with the terms of the second offer, that's great. But to avoid any confusion here I would suggest you write the company a very nice letter and send it by traceable means with proof of delivery.

Let them know you appreciate their offers but you are acting on and accepting the second offer, include a copy of it with your letter. We don't want their to be any surprises later with the company about which one you accepted and acted under.

When your first payment is received, you will want to make sure it is credited and applied to your account under the second settlement offer. And since the first payment looks like it was for 14% of the balance, you only have a bit over 6% to go.

Keep all the documentation in a safe place about the offer and proof they received your payments. In fact, staple it all together and keep it with your other important papers. Don't lose it. Keep it forever.

Along the way, ask the company for any proof of the payments being made under the second agreement. Keep that proof with the other papers.

Just remember, representatives will often say one thing on the phone but unless you have proof and documentation to back it up, those verbal statements are just about worthless.

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