Is there room to negotiate student loans in default

Paying for College
1

<p>I'm an attorney in NY, but I haven't handled any student loans before. I got a call from a friend whose daughter has defaulted on student loans she took out from 2 New York colleges. The friend wants to see if this can be cleaned up and has some money available to pay the principal and interest of at least one of the colleges There may not be enough to pay both colleges and there may not be enough to pay the collection costs for the one college. I spoke with the collection agency (the same agency handles both loans) and told him that the father may be in a position of making a lump sum payment for one loan if we can lower the collection costs. The agent said there is no possibility of compromise or settlement and that even the collection costs are non negotiable. </p>

<p>I've requested a statement breaking down the amounts due and copies of the notes. </p>

<p>I'm not positive, but I suspect these are subsidized loans, and don't know whether that makes a difference. </p>

<p>Does anyone know whether there is any room for compromise or settlement when it comes to student loans. Also, if you know whether there is a difference in the treatment of subsidized or unsubsidized loans when it comes to settlement or compromise, please advise.</p>

<p>Thanks.</p>

2

<p>There is no way to escape from student loan debt. They cannot be discharged, even when declaring bancruptcy. The holder of the debt has no reason to negotiate, because there is no advantage in doing so.</p>

3

<p>See if the originator of the loan will be ok with entering a new payment agreement and removing the default status after x number of consecutive on-time payments. I think 12 months at a reduced amount is standard. They might shorten it with larger monthly payments.</p>

4

<p>Are these Stafford loans? If so, there is no room for negotiation. They must be paid in full.</p>