There are three ways to handle defaulted Discover student loans:
When it comes to refinancing defaulted private student loans, the options are few and far between. Most lenders won’t touch you with a ten-foot pole, having already deemed you a risky prospect, given your previous inability to meet your financial obligations. But fear not, for one lender will throw you a lifeline.
Enter Yrefy, the student loan refinancing outfit specifically catering to those struggling with student loans in collections. Not only do they offer competitive fixed and variable rates, but they also work with borrowers to get a new loan with a customized, flexible repayment plan that won’t leave them high and dry.
And the best part?
Despite subjecting applicants to a hard credit check, the company doesn’t rely only on credit scores to make lending decisions. Rather, it factors in the borrower’s income and expenses to determine their ability to repay their student loan debt.
Related: Yrefy Review
Negotiate a settlement
While there are no guarantees, Discover and other major student loan lenders such as Sallie Mae and Navient are known to be receptive to settling private student loan debt that’s been charged off. Though they may not have been open to such a proposition before the loans defaulted, they’re often amenable to the idea afterward because it’s simply good business sense.
In essence, they’re given an opportunity to recover some of their losses rather than risk receiving nothing if the statute of limitations ends before they can haul you or your cosigner into court.
To secure a settlement, you must likely come up with a lump sum payment or be able to make payments on a reduced settlement amount over a few months.
The extent to which you can reduce your debt burden through a settlement hinges on a few key factors, including your loan amount, financial situation, and the skill level your negotiator possesses.
It stands to reason that you might want to consider enlisting the services of a seasoned student loan attorney with a wealth of experience working with Discover and its often dogged debt collectors.
Related: Can You Negotiate a Student Loan Payoff?
File student loan bankruptcy
With private student loans, the prospect of filing for bankruptcy may not immediately occur to you as an ideal solution. You might even think to yourself right now, “But wait. Student loans can’t be discharged in bankruptcy!” You can. For those weighed down by an overwhelming burden of debt, it can be a lifesaver.
Related: How to File Bankruptcy on Student Loans
Unlike student loan refinance, which may not always be a viable option, bankruptcy can resolve your private loans from Discover and let you reclaim the ability to live a full life, complete with buying a home, starting a family, or pursuing other long-held aspirations.
As a student loan lawyer who has helped many clients navigate this treacherous terrain, I can attest to the efficacy of bankruptcy in securing realistic and affordable settlement agreements. Take, for example, a single mother in Texas who was able to settle a $112 thousand private student loan debt for a mere $40 thousand over a decade, interest-free. This arrangement enabled her to drastically reduce her monthly payments from an exorbitant sum greater than her mortgage to a more manageable $300 per month.
Another client, a teacher in Missouri, was able to settle a whopping $430 thousand in private student loan debt for just $86 thousand over 20 years, with a modest 1% interest rate. The impact on her financial well-being was truly transformative, and these types of outcomes are far from rare.
Interestingly, private student loans are often easier to manage in bankruptcy than federal student loans. Private lenders are far less likely to extend flexible student loan repayment options, as does the Department of Education with its income-driven repayment plans or student loan forgiveness programs like Public Service Loan Forgiveness.
While filing for bankruptcy may seem intimidating, it’s worth noting that the financial repercussions are typically limited to two years. Often, this is a more favorable outcome than continuing to struggle with private student loans that may never be repaid.
Related: How to Prove Undue Hardship for Student Loans