Settling Student Loan Debt With Navient for Less

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Stanley Tate

#1 Student Loan Lawyer

Updated on November 3, 2022

Borrowers who fall behind on payments may be able to settle their private student loan debt with Navient, but those with FFEL Loans won’t be able to strike a deal to pay less than they owe.

Earlier this year, Navient struck a deal with several state attorney generals to resolve claims that it steered federal student loan borrowers into long-term forbearances and made predatory private student loans to other borrowers who attended mostly for-profit schools with low graduation rates.* As part of that deal, it sent restitution payments to people with FFEL Loans and canceled $1.7 billion in defaulted private loans for nearly 66 thousand people.

Related: Do I Qualify for the Navient Student Loan Settlement?

Navient has already processed those claims. If you still owe money on your Navient student loans, you won’t be able to cancel them under the lawsuit settlement or President Biden’s student loan forgiveness plan. But you may be able to negotiate a student loan settlement.

Keep reading to learn how to settle private student loans with Navient.

* Many of the predatory, subprime private loans were made by Navient’s predecessor Sallie Mae.

Will Navient settle student loans?

Navient will agree to settle the private student loans it owns but not the federal loans — FFEL Loans, Stafford Loans, subsidized and unsubsidized, and so on — it services for guaranty agencies. To get a settlement, you’ll have to fall behind on your student loan payments for several months. In all of my years as a student loan lawyer, I’ve never seen Navient agree to settle loans that are in deferment, forbearance, or repayment.

Skipping your monthly payments isn’t without risk. It damages you and your cosigner’s credit scores and puts you both at risk of being sued, which could lead to your wages being garnished, money being taken out of your bank account, and a lien placed on your home. But it could also result in you finally escaping that loan balance you’ve been battling for years.

Related: Why Can’t You Settle Student Loans in Good Standing?

Will Navient sue me?

Navient typically doesn’t sue immediately for defaulted loans. It costs them money to hire a law firm. As a result, Navient usually waits until after debt collection agencies prove ineffective at collecting money from you before they send your loans to a law firm to file a student loan lawsuit against you.

What if Navient sent my loans to Aidvantage?

Navient ended its contract with the U.S. Department of Education and sent all of the loans owned by the department to a new student loan servicer, Aidvantage. If Aidvantage has your loans, then the federal government owns your student debt. And that means you qualify for income-based repayment options and loan forgiveness programs. But you won’t be able to save money with a settlement. Visit the Federal Student Aid website, studentaid.gov, to see what other types of loans you have.

How to settle student loan debt with Navient

You can settle your student loans on your own or hire a student loan debt settlement attorney. Here are five steps to take if you decide to go it alone.

  • Step 1 – Review your loans. Before starting the settlement process, check how many loans you have, the balance for each, and the last payment date. This information will help you estimate your potential settlement amount and when settlement will become a possibility.

  • Step 2 – Check your personal finances. You’ll get the best deal with a large, one-time cash payment. Check your bank accounts, savings, 401k, and so on to see how much money you can put your hands on and how quickly you can do it. Talk with your family members and friends to see if they’re willing to pitch in with a gift or a low-interest loan. Other options include getting a personal loan, tapping into your home equity, or taking out a cash advance on your credit cards.

  • Step 3 — Speak with your cosigner. Falling behind on your payments puts you and your cosigner in harm’s way. So if if you haven’t yet missed a payment, chat with your cosigner about your plans for tackling the debt. You might also try to get them released from the loan. But that creates its own challenges. You’ll need to make at least a year’s worth of on-time payments for the full amount due or refinance the loans in your name only, which may not be an option depending on your credit score.

  • Step 4 — Start the settlement process. Find out which debt collector Navient sent your loans to and then contact it to start the settlement process. After asking questions about your personal finances and reviewing your credit reports, the representative may offer a settlement for a lump sum or over less than a handful of years. You can accept that offer or counter it. The representative may ask you about any financial hardship you experienced that caused you to miss payments. I typically won’t offer less than 20% of the current loan balance for loans that have just recently defaulted.

  • Step 5 — Review the settlement offer and pay it. When you get the agreement letter, check your name, contact information, account number, loan number(s) and balance(s), and the settlement terms (payment amount, due date, and so on). If everything checks out, call the debt collector to make the payment using your checking account information. You can also send a wire transfer. But you won’t be able to pay using a credit card.

Typical settlement agreements

Over the past several years, I’ve negotiated dozens of student loan settlements with Navient. Here are the three types of settlement offers I’ve seen:

  • A lump-sum payment. You’ll make a large payment by the end of the month to pay the settlement amount in full. You’ll typically save the most money with this type of agreement.

  • Monthly payments. Depending on your balance and finances, a lump sum may be out of reach for you. In that case, it might be possible to negotiate a settlement that lets you pay a reduced balance over several months — usually no more than 60. The settlement percentages are typically the highest with these types of deals.

  • A lump sum plus monthly installments. If you have some money to put towards the loans but not enough to pay the settlement in full, you may arrange to put down 10-20% of the settlement amount and then pay the rest at 0% interest over no more than 60 months.

Here are a few Navient settlement offer letters that I recently negotiated for clients*:

And here’s a case study showing how I helped Eddie get free from $68,897.80 in private higher education loans by negotiating a settlement with Navient.

Related: Can You Pay Off Student Loans in One Lump Sum?

*I’m providing these letters to you only as an example. Your situation is unique and can end differently.

Here’s a typical timeline for settling Navient private student loans.

  • Months 0-4. After you miss your first monthly payment, Navient will add a late payment notice for each loan you’re behind on to your credit report.

  • Months 5-7. Your loan will move to a pre-default unit that will work to bring your account current. They’ll call every phone number they have on file for you, including family members, friends, and employers. If they can’t work out a payment plan with you, they’ll tell you that your account will be sent to a collection agency at the end of the month. Around that time, they’ll send you a letter titled “Litigation Review Pending.” That letter is basically a last-ditch effort to encourage you to make a payment before the loan is charged-off and collection costs are added to your balance.

  • Months 8+. Navient will move your loans to an internal or external debt collection unit. Once that happens, you’re no longer eligible for deferments or forbearances. And there isn’t anything you can do to return your loan to good standing. Navient will continue reporting late payments to the credit bureaus until you pay the balance in full or negotiate a settlement.

What happens after you settle Navient student loans?

Navient will give you a debt clearance letter about six weeks after you’ve paid the settlement in full. This letter demonstrates that you are no longer financially liable for the settled loans.

The IRS will also send you a Cancellation of Debt notification (a 1099-C) at the end of the year. The outstanding part of your student loan is reported as taxable income on a 1099-C. You must include this in your tax return and may need to pay income tax on the amount unless you can get it excused for insolvency.

Related: Tax Implications of Paying Off Student Loans

You can also work with a credit repair professional to try and clean up your credit history to raise your score faster.

Alternatives if you can’t settle

If you’re unable to reach a deal with Navient, here are three other options to get relief:

  • Consolidate your FFEL Loans. Consolidating your federal loans into the Direct Loan Program increases your repayment options under the Department of Education’s income-driven repayment plans and makes you eligible for the Public Service Loan Forgiveness Program and the IDR Waiver. Both programs can write off your remaining balance if you meet all eligibility requirements. Read more about how to apply for student loan forgiveness.

  • Refinance your private loans. If you have a good credit score and enough income to cover your living expenses, refinancing may give you a lower interest rate, a longer repayment term, and more flexible repayment options. Typically, you’ll need a good credit score (680+) and a low debt-to-income ratio to get the best rate. Otherwise, you may need a cosigner to get competitive rates and terms.

  • File bankruptcy. Rushing to bankruptcy court may be the best choice for you if you can’t qualify for refinancing or afford a settlement and aren’t willing to wait for the statute of limitations to run out. Neither Chapter 7 nor Chapter 13 bankruptcy will automatically clear your student loan debt. To do that, you’ll need to file an adversary proceeding and convince the judge that the loans are causing undue hardship for you and your dependents. Read more about student loan bankruptcy.

Watch out for scams

Navient recently settled a student loan forgiveness lawsuit with the American Federation of Teachers (AFT). The union alleged that Navient was a shoddy and ineffective student loan servicer that caused tens of thousands of teachers to miss out on earning credit toward the PSLF Program. Borrowers didn’t get any debt cancellation as part of the settlement, but that hasn’t stopped scammers from targeting people with phone calls promising debt forgiveness for a fee.

Other Navient Lawsuits

  • Consumer Financial Protection Bureau (CFPB). The agency charged by the federal government with protecting consumers sued Navient, alleging its loan servicing practices steered borrowers toward forbearances instead of income-driven repayment plans and provided unclear information about how to re-enroll in IDR Plans and how to qualify for a cosigner release. The case is still pending after the court denied Navient’s motion to dismiss.

  • State AG Cases. Attorney Generals for California, Illinois, Mississippi, New Jersey, New York, Pennsylvania, and Washington State sued Navient for many of the same alleged violations raised by the CFPB. Those cases are still pending. A state court judge in Washington ruled that Navient violated consumer protection laws.

Want expert help with a Navient private student loan settlement?

Private student loan lenders like Navient are often willing to settle student loans, but only after the borrower misses payments. Negotiating a payoff for less than the current balance isn’t guaranteed and comes with risks. But with the right plan, you might secure a deal that lets you pay significantly less than you owe.

Let’s talk if you want help settling your student loan balance. During our call, we’ll discuss possible settlement options and any alternatives that fit your needs and goals.

UP NEXT: Is Navient Forgiving Loans?

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