How to Settle Navient Student Loans After Default

Navient still settles loans it owns — mainly private student loans and some older FFEL loans — but only after they’ve gone into default. It no longer services active federal or private loans. That matters because if your loans are with MOHELA or Aidvantage, you can’t negotiate a settlement with them. Those servicers simply collect payments.

Settlement only becomes possible once the loan defaults and is sent back to Navient’s recovery unit or a third-party collection agency. At that point, Navient can consider a payoff deal — and what you can negotiate depends entirely on your loan type.

Note: This article covers individual settlements after default. For information on the 2022 state AG and 2025 Illinois lawsuits, see Navient Lawsuit & Settlement Explained.

Navient doesn’t settle loans that are current, in deferment, in forbearance, or in an active repayment plan. Settlement becomes an option only after default, when the account is charged off and either handled by Navient’s recovery unit or assigned to a third-party collector.

Here’s how settlement typically works by loan type:

• Private Navient Loans: These are the most negotiable. Once charged off, Navient often accepts lump-sum or short-term payment arrangements for 30%–60% of the total balance. Older or riskier accounts may settle for even less.

• Commercially Held FFEL Loans: If your FFEL loan defaults and it is a privately held federal student loan, it may be pulled back to Navient or a guaranty agency. Settlements are possible, but less generous—often removing collection costs or accrued interest rather than cutting principal.

When Navient agrees to settle private student loans, the deal is usually structured in one of three ways. The terms depend on how long the loan has been in default, how much you can pay upfront, and the balance size.

• Lump-sum payment. Navient’s preferred option. You pay the full settlement amount in a single payment — typically by the last business day of the month you reach the agreement. This setup delivers the biggest discount because it clears the account immediately and requires no follow-up.

• Monthly payments. For higher balances, Navient may allow a multi-year repayment plan, usually spread over up to five years. These settlements aren’t as common as lump sums, but they do happen. Payments are interest-free, though the total discount is smaller.

• Hybrid (down payment + installments). A common middle ground. You make an initial payment equal to 10% of the total balance, then pay the remaining negotiated amount in monthly installments. For example, if you settle a $40,000 loan for 50 cents on the dollar, you’d pay $4,000 upfront and the remaining $16,000 over the agreed schedule.

Who you call depends on where your loan is today:

• If your loan is still with MOHELA or Aidvantage: Settlement isn’t available yet. You’ll need to wait until the loan defaults, charges off, and moves to a collection agency.

• If you’ve received a collection notice: Call the agency listed on the letter—they’re the only ones authorized to negotiate. Confirm who owns the debt before agreeing to anything.

• If you’re unsure who currently holds the loan: Contact Navient’s Portfolio Management Unit at (866) 291-4403. They can confirm whether your loan is still with Navient, has been transferred to a guaranty agency, or is now with a third-party collector.

Navient doesn’t settle right away. It follows a predictable sequence after you stop paying:

• 0–90 days past due: Your account is simply delinquent. Navient’s early-stage collectors call, email, and text to get you back on track. They may offer short-term forbearances or small rate reductions — nothing permanent.

• 90–120 days: Outreach escalates. Navient may contact relatives, references, or your employer to pressure payment. You’ll still only see temporary options, not true settlement offers.

• 120–180 days: Your account moves to a pre-default unit. Calls intensify, and Navient might float an early lump-sum offer around 75¢ on the dollar — usually too high to accept.

• Before charge-off: You may receive a “Litigation Review Pending” letter. It’s a final push to set up payments before the loan accelerates and defaults.

• After charge-off (default): The loan transfers to Navient’s Recovery Unit or an outside collection agency. This is when real settlement negotiations start and discounts of 40–60% become realistic.

1. Confirm your loan type

Your settlement options depend entirely on whether your Navient loans are private or federal. Check StudentAid.gov:

• If your loans appear there, they’re federal.

• If they don’t, they’re private.

Private loans allow for deeper discounts once they’ve defaulted. Federal loans only settle after default and usually for smaller reductions.

2. Review your finances

Decide what you can realistically offer as a lump sum and what you could manage on a payment plan. Look at every funding source you could tap: personal savings, a 401(k) loan, family assistance, or a personal loan. The stronger your cash position, the better your negotiating leverage.

3. Understand timing and leverage

The longer a loan has been in default, the more negotiable it becomes. Accounts close to the student loan’s statute of limitations or long-delinquent loans often qualify for deeper discounts.

If your loans aren’t yet in default, some borrowers consider a strategic default to open settlement options—but that comes with credit and legal risks.

Related: Strategic Student Loan Default: What to Know Before You Stop Paying

4. Contact the current collector\

Once your loans default, Navient may handle recovery internally or assign it to an agency like Allied Interstate or Pioneer Credit Recovery. Always confirm who owns the debt—Navient, a guaranty agency, or the Department of Education—before you start negotiating.

5. Negotiate your offer

You can make offers orally or in writing. The collector may ask about your income, expenses, or recent hardship, but what really matters is whether your proposal fits their internal parameters.

They’ll weigh:

• How much you can pay now versus over time

• The age and risk of the loan

• Whether collecting later is worth more than accepting your offer today

Your goal is to make your offer look like the best immediate outcome—certain cash now instead of uncertain payments years down the line.

6. Get it in writing

Before paying anything, insist on a written settlement letter that lists:

• Loan numbers and total balance

• Payment amount and due dates

• Confirmation that the payment “satisfies the account in full”

Pay only through a verifiable method (ACH or wire transfer) and save every record of communication and payment.

When Navient accepts a deal, it sends a formal letter from its Recovery Unit in Fishers, Indiana. The letter lists your loan numbers, total balance, settlement amount, and payment due date. It also confirms that once all payments clear, your loans are “settled in full” and reported as “paid in full for less than the full balance.”

It includes payment instructions, tax-reporting language about the 1099-C form, and the contact number for Navient’s Recovery or Portfolio Management Unit. Always verify payment details before sending money.

Navient doesn’t offer “pay-for-delete” agreements, so your credit report won’t erase the account after settlement. Instead, once the settlement is complete—whether paid in full or through installments—the account will be updated to show “paid—settled for less than full balance.”

Your credit recovery usually starts the following month as your report reflects a zero balance. You may see a short-term dip from the charged-off status, but the impact fades as new positive payment history builds.

Within about two weeks of your first or final payment, Navient or the collection agency will send a confirmation receipt showing the payment was applied. Don’t panic if your credit report still shows the original balance during that period—it takes time for the reporting systems to update.

Roughly 45 business days after the final payment, you’ll receive a clearance or satisfaction letter confirming the debt is fully resolved. It’s not legally required, but it’s worth keeping for your records in case any reporting errors or collection disputes arise later.

If you want to accelerate your score recovery, consider working with a reputable credit repair or credit-building professional who can help remove outdated notations and rebuild positive history faster.

Related: How to Remove Settled Student Loans From Credit Reports

Not everyone can afford to settle with Navient—and that’s the reality. What you can do next depends on your loan type.

Federal Loans

If your loans are federal, you may still qualify for consolidation or rehabilitation. Either option can bring the loan out of default and restore access to income-driven repayment and forgiveness programs. Once you default, though, you lose eligibility for deferment, forbearance, or new repayment plans until you fix the default.

Related: How to Get Federal Student Loans Out of Default

Private Loans

If your loans are private, refinancing is usually off the table after default—unless you qualify with a niche lender like Yrefy that refi’s charged-off accounts. Otherwise, your choices are limited. You can wait to see if Navient or a collector files a lawsuit, or you can address the debt through student loan bankruptcy. Both paths carry risk, but they’re the only realistic next steps when settlement isn’t possible.

Related:

• How Navient Federal Student Loan Forgiveness Works Today

• Navient Has a Private Student Loan Forgiveness Program