There comes a point when you look at your loan balance, the interest rate, your income, and it hits you: you can’t keep up with your student loan payments to SoFi.
So what do you do?
You can ask for a forbearance. But that only delays the inevitable.
You’ve already refinanced. So it’s going to be difficult to refinance a second time.
But what about negotiating a student loan settlement?
Does SoFi settle student loans?
At the end of this article, I’ll share details from a student loan settlement I negotiated with SoFi loan last year.
SoFi student loans are private student loans.
In my experience, private student loans settle for a lot less than federal student loans, which almost never settle for less than 85-90% of the loan balance.
How much less? That depends on the private student loan company.
For instance, I've seen private student loan settlements with Navient for around 35% of the loan balance.
Other companies don't go that low.
Before you default on your student loan, understand that settlements are risky. There’s no guarantee SoFi or any other private student lender or the debt collector will agree to a settlement.
How low does SoFi go? More on that below.
What Happens When You Default
In practice, when you miss a payment, SoFi will say your loan is delinquent.
Technically, under your loan’s terms, SoFi defines default for student loans when you miss one payment.
Regardless of whether your loan is delinquent or in default, what happens next is effectively the same.
SoFi typically starts reporting late payments to your credit report once you’re 45 days past due on a payment.
SoFi typically sends a defaulted student loan to a debt collection agency after 180 days of missed payments.
But No Garnishments or Bank Liens
Because SoFi loans are private student loans, you don’t have to worry about wage garnishment, tax refund offset, social security offset, or SoFi being able to take money out of your bank account.
At least not right away.
Before SoFi can garnish your wages or levy your bank account, they have to sue you and get a judgment against you.
How long does it take SoFi to Sue for a Defaulted Student Loan?
There’s no set timetable for SoFi to sue for a defaulted student loan. Typically, holders of private student loans wait until the statute of limitations is about to lapse before they sue.
Having said that, SoFi has sued borrowers throughout the nation pretty quickly for personal loans.
What that means for SoFi’s private student loans...?
Does SoFi Settle Student Loans
SoFi does settle student loans - but only after they go into default.
Last May, Josh hired me because he owed $140,182.74 for a private student loan to SoFi.
At the time, his loan, which was being serviced by MOHELA, was 6 months past due.
I began negotiations right away with MOHELA/SOFI, but those conversations went nowhere. They were unwilling to settle.
In July, his account was sent to Real Time Resolutions, a debt collection agency.
They offered a settlement of 80% of the balance payable immediately (~$112 thousand).
Josh didn’t have that type of money lying around. Not many student loan borrowers do.
So we countered with the maximum he did have available for a lump sum settlement, $32,870.
SoFi rejected that immediately. We were just too far apart in what SoFi was willing to settle for and what Josh had available.
So negotiations continued.
In November, I approached Real Time Resolutions again to see if SoFi had softened its stance.
The debt collector suggested we provide Josh’s financial statement (monthly income and expenses) along with a copy of his last 2 tax returns. They wanted that information so they could submit a “hardship” settlement request to SoFi.
We did that.
In December, they came back with a final offer of 50% of the loan balance paid in a lump sum ($70,091.37) or 70% of the loan balance paid over 36 months at 0% interest ($98,127.92).
Josh couldn’t afford the lump sum offer, but he could do the monthly payments ($2,725.77). So he accepted.