Q: Does Nelnet negotiate payoffs or offer loan forgiveness for student loan debt?

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Nelnet does not negotiate student loan settlements for the loans it services. Nelnet doesn't have the power to accept settlement offers. It's not the loan holder. It's merely the loan servicer. Its role is limited to processing monthly payments, repayment plan requests, forbearance/deferment requests, and loan consolidation applications.

Nelnet also tracks your progress towards forgiveness under the federal government's student loan forgiveness programs. In particular, they focus mainly on forgiveness under the income-based repayment plans.

They also track progress for student loan borrowers who work in the public service. But if you're trying to get your loans forgiven under the Public Service Loan Forgiveness Program, your loans should really be with FedLoan Servicing. After all, FedLoan is the designated servicer for all PSLF applications.

How to negotiate student loan settlements Nelnet services

Nelnet primarily services federal student loans, which means the loans it acts as a loan servicer for are owned by a guaranty agency or the US Department of Education.

You can't settle a federal student loan in good standing.

You have to default first.

After you default, a settlement becomes possible.

But unlike with private lenders, you're not going to negotiate a student loan settlement for pennies.

Federal student loan settlement amounts are typically going to be for no less than 85% of the principal balance plus interest minus collection fees.

To get a settlement, the first thing you need to do is contact the federal government's Default Resolution Group. The DRG will tell you whether they have your defaulted federal loans or if they've sent the loans to another debt collection agency.

Once you find out who has your loans, call them and ask them your options for getting your loans out of default. At that point, you'll be asked whether you can pay the loan balance in full. If you say no, they'll then ask can you do a lump sum settlement of the loans? If you indicate you might be able to raise some cash for a loan payoff, they'll offer you a settlement amount. This amount will typically have to be paid in 30 to 90 days.

Can you counter that offer? Sure. Will they accept? That's another story.

The dangers of settling federal student loans

Settling federal student debt isn't without cost. Because you can't negotiate a settlement until you default, you have to worry about the consequences of federal student loan default.

Click here to learn How to Get Out of Student Loan Default

Specifically, you have to worry about:

  • your credit score being damaged by missing 9 monthly student loan payments
  • your employer getting a wage garnishment order
  • your income tax refund being offset
  • your Social Security benefits being garnished

One thing you don't have to worry about, however, is your bank account being garnished. The money in your bank account is safe until you're sued, and a judgment is entered against you. Federal student loans typically don't sue. Private student loans, on the other hand, do sue; it's there only way private loans can forcefully collect any of the unpaid loan amounts.

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