Settling an old student loan

[maddog2112]

I`m in the process of settling an old student loan and am wondering what I should have the collection agency send me in writing, before I send the check?

[backtoschool]

Since student loans are not dischargable, they are rarely settled for less than the principal balance owed. I would get a settlement letter in writing before you send money, since most likely, by "settling" you are not getting rid of the full loan.

[maddog2112]

We`re pretty close to the principal amount. With accrued interest, we`re at 1900 and principal is 1200. I`m offering 900 lump. I will ask for a settlement letter saying debt is paid in full with the lump sum. Thanks

[tcreegan]

Hi maddog2112,

To cover all your bases I would contact the loan originator and confirm with them that the settlement will get rid of the entire loan.

Not that collection agencies ever do underhanded deals....

Tom in Colo

[backtoschool]

Hi maddog2112,

To cover all your bases I would contact the loan originator and confirm with them that the settlement will get rid of the entire loan.

Not that collection agencies ever do underhanded deals....

Tom in Colo

I totally agree with Tom. Student loans rarely get settled, except for removing some interest and fees. Make sure that this deal is legitimate before you throw your money at it.

[maddog2112]

I thought that once the loan was handed over or sold to a collection agency, in this case LCS. The original lender (citibank), would be out of the picture. Are you saying the collection agency is still working for the original creditor? How can I find out?

[backtoschool]

I thought that once the loan was handed over or sold to a collection agency, in this case LCS. The original lender (citibank), would be out of the picture. Are you saying the collection agency is still working for the original creditor? How can I find out?

If this is a student loan that is in any way Federally guaranteed, then there is a guaranty agency that is ultimately responsible for closing the loan and marking it as settled. This will not be the bank, but will be the guaranty agency that paid the bank when you defaulted. Make sure that the collector is working with that agency and not just trying to collect part of the debt. Collectors of federal student loans do not have that much discretion for making settlements.

[maddog2112]

Backtoschool. Thanks for the good info. I will make sure they are working for the guaranty, and that the guaranty is agreeable to a settlement in full.

[ccsjoe]

Make sure you cover all your bases, a CA pulled a fast one on my wife right after we got married, and it wasn't even a student loan, but a charged off cc. They offered settlement for 55% of balance, sent letter with it but letter never indicated that the balance was settled in full, only that the amount settled was the amount we paid. Six months later a different CA contacted us and wanted to sue her for the remaining 45%. Never got settled. Paid 15% on that one, but received a full satisfaction of account letter.