Tampa Student Loan and Bankruptcy Lawyer Blog — May 5, 2020
We are seeing more delinquencies as people don’t realize they were due to make a payment and for those borrowers who cannot afford to make a payment now. There may be some relief for those who are unable to pay their debts. The Department of Education has very strict limits on settlement of federal student loans:
100% of current principal and interest (better credit reporting)
100% of principal and 50% interest
- 90% of principal and interest
- They will typically waive collection costs, but a lump sum amount is due within 90 days of a written offer. If you have an older Federal Family Education Loan (FFEL), you may be looking at a 30% reduction of the balance owed. Before consideration, a 20-plus page financial package would need to be submitted. We’ve seen much better terms, but it may take more time due to the Department back checking some of the information provided on financial statements through subpoenas to the financial entities directly. We’ve seen much better terms but it may take more time due to the Department back checking some of the information provided on the financial statement through subpoenas to the financial entities directly.
- Bottom line – don’t default. There is no benefit to defaulting on a federal loan, as there is no statute-of-limitations (like murder) and there is limited negotiation for a settlement. They also add 25% to the balance when you default as collection costs, and then it will cost to consolidate or rehab back out of the default.
Instead, consider your other options: SAVE forbearance for a few more months most likely, IBR, consolidate Parent Plus loans for ultimate IBR, bankruptcy to discharge other debt, perhaps student loan debt as well, and pay a smaller student loan payment, disability discharge (look at vocationally, not whether you can feed or dress yourself), etc. We can help. Please contact us.
Bay news 9 interviewed me and a few clients for a story that will be published tonight at 10:00 pm EST about the topic of collections starting today. I’ll post the story when it is available.
