Private student loan debt can often be overwhelming. If you are having trouble paying your tuition costs and you’re feeling like you may have overspent this summer, you may want to consider a private student loan debt relief option. Loan consolidation is one such option that allows students to combine their federal student loans into one convenient monthly payment with a lower interest rate. However, consolidation is not always the best choice for some students. Why is that? Loan consolidation is usually a preferred debt relief option for borrowers because it usually offers an instant relief from mounting college loan debt. Unlike a consolidation loan, however, private student loans cannot usually be discharged during a bankruptcy. When you file for bankruptcy, you are not releasing any assets to settle the outstanding debt. A private student loan debt settlement is, however, a viable alternative if you are having trouble paying your private student loans.

A private student loan debt settlement happens when you negotiate with your private student loan lender to settle the total amount you must pay back over time. The lender may agree to forgive a portion of your late fees or reduce your interest rate on your private student loans. You can also ask for a reduction in your outstanding balance, which means you will only have to make one payment per month instead of several. How do borrowers get through these negotiations? The best way is through a professional debt management counselor. Counselors can help borrowers explore all of their options, which may include a private student loan debt settlement. If a borrower is facing financial difficulty, they can also refer their clients to the right counselors.

Why should a student pursue private loan debt settlement

Why should a borrower negotiate for a settlement? Many people who have defaulted on their student loans will face similar problems in the future. They may not be able to get credit or find good employment. With a settlement, they at least get to break even, which gives them some hope. There is one disadvantage to this method: the borrower must pay the lender the lump sum money. If they don’t, the lender may file a foreclosure lawsuit against the borrower. Once a lender files a foreclosure, they lose all rights to the remaining balance. It may be difficult to obtain a second job or get a line of credit after a lender files a foreclosure. The advantage to a loan consolidation is that a borrower can usually get a good interest rate and a lower monthly payment, making this a great option for someone who is trying to re-establish their credit.