Everyday there are a number of individuals who apply for a student loan. This is indeed a quite a common practice making it possible for one to pursue a certain degree of choice. On the other hand, student loan settlements are also being discussed frequently especially with the ever increasing interest which accumulates over time. What is Federal Student Loan Settlement and how are students affected by it?
Defaulted loanshave a huge impact on students especially when the lender decides to pursue the garnishment of one’s wages and Social Security benefits. They can alsooffset one’s income tax refund and worse, block the renewal of their professional license.If this goes on without any settlement, a student’s credit and record will be badly tarnished. For that matter,Federal Student Loan Settlementusually thencomes into the picture allowing for the borrower and lender to come into an agreement.
Federal Student Loan Settlement usually involves the borrower to acquire a lump sum of payment to pay off most of the loan balance and in turn settle their defaulted debt. A period of 90 days is given and within that date, students are required to pay the settlement amount in full. Students are already having problems with their debt in the first place soacquiring a lump sumof payment can beproblematic. It would require sheer luck such as winning a lottery, receiving an inheritance or having your family lend you money.Of course, this rarely ever happens and one cannot rely on luck alone. Having an adequate understanding about Federal Student Loan Settlement can help students find a good settlement.
There are three settlement options for private collection agencies to make in which the US Department of Education allows without prior approval. The first one includes waiver of the collection charges. The second one is where the current principal balance is paid plus half of the accrued but unpaid interest. Lastly, at least 90% of the current principal and interest balance must be paid.
A Repayment Option
As mentioned earlier, it can be hard to acquire a lump sum of payment in order to pay off your debt. Students however, can discuss an affordable repayment option plan such as an income-based repayment to their lenders as an alternative. The income-based repayment option is where students pay a percentage of their discretionary income for up to 20 or 25 years. It is ideal for students to make use of these options when dealing with Federal Student Loan Settlement.