Can You Negotiate With Sallie Mae?
Sallie Mae, which used to be called SLM Corporation, is one of the biggest companies in the US that takes care of student loans. There are over 40 million borrowers and hundreds of billions of dollars in student loans that Sallie Mae manages. They are the biggest company in the student loan business.
As a servicer of federal student loans, Sallie Mae has little flexibility or incentive to negotiate payment terms or forgive loans. Federal student loans have protections that make them very difficult to discharge in bankruptcy. This gives Sallie Mae significant power to collect on the loans with little risk.
However, when it comes to private student loans owned and serviced by Sallie Mae, there can be more room for negotiation. Private student loans generally have higher interest rates and fewer protections than federal loans. The lender takes on more risk with private loans. Here’s what you need to know about negotiating with Sallie Mae on private student loans:
Can You Settle with Sallie Mae for Less Than You Owe?
It is possible to negotiate a settlement for less than the full balance with Sallie Mae, but it’s not easy. Some key points:
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Sallie Mae typically won’t consider settling unless the loan is in default. This means going 270+ days without making a payment. Avoid default if possible, as it damages your credit.
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The further behind you are on payments, the more incentive Sallie Mae has to settle for less than the full balance. Once a loan is 360+ days delinquent, settlement options open up.
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Sallie Mae may need a lump sum payment up front before they will agree to forgive a loan. They may accept 50% or less of the loan balance. You can get a better deal if you can pay more up front.
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Settling with Sallie Mae directly is possible but can be challenging. Using a student loan settlement company often yields better results.
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Any forgiven debt may be taxable income, so be prepared for a 1099-C form reporting settled debt to the IRS.
Tips for Negotiating with Sallie Mae
Keep these things in mind if you want to talk to Sallie Mae about a private student loan balance:
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Get everything in writing first. If Sallie Mae agrees to settle, have the offer and terms put in writing before sending payment.
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Avoid debt relief scams. Don’t let a third party charge high upfront fees before settling debt. Research companies thoroughly first.
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Know your state laws. In some states, Sallie Mae can’t sue people to get back private student loans after a certain amount of time has passed. Look into whether this applies in your state.
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Don’t admit liability for the debt. This resets the statute of limitations clock and prevents using the SOL as a defense against legal action.
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Seek tax advice if settling debt. Forgiven debt through a settlement may be treated as taxable income. Consult a tax pro to understand the implications.
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Contact Sallie Mae early and often. The sooner you contact them about hardship and inability to pay, the more willing they may be to negotiate favorable terms. Follow up regularly.
Alternatives to Settling with Sallie Mae
If negotiating a settlement with Sallie Mae isn’t feasible, you still have options, including:
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Loan rehabilitation – After default, you can rehabilitate federal loans by making 9 on-time payments in 10 months. This removes the default status.
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Deferment or forbearance – Temporarily postpone payments due to economic hardship or continuing education. Interest still accrues.
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Alternate repayment plans – Options like income-driven repayment plans can make federal loan payments more affordable.
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Co-signer release – If you had a co-signer on private loans, see if Sallie Mae offers co-signer release after a certain number of on-time payments.
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Refinancing – You may be able to refinance high-interest private student loans with a third-party lender at a lower interest rate. This consolidates debts into a new loan with different terms.
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Bankruptcy – Private student loans may be dischargeable through bankruptcy, unlike federal loans. Consult a bankruptcy attorney.
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Debt defense – Relying on a statute of limitations or laches defense may stop collections and lawsuits for older private student loan debt.
The Bottom Line
Negotiating with Sallie Mae to settle a student loan for less than you owe is possible if the loan is in default. Avoiding default in the first place is ideal, but if you have no option, be prepared to negotiate firmly and seek assistance. Consider alternatives like rehabilitation, alternate repayment plans, or discharging debt through bankruptcy or a debt defense. With persistence and properly applying the right approach, you can resolve education debt with Sallie Mae.
When Negotiating a Settlement for Student Loans Makes Sense
Negotiating a student loan settlement generally makes sense if:
- You can no longer afford your monthly payments,
- You’ve used up your available forbearance options,
- Your lender or servicer won’t offer you an affordable repayment plan, and
- You’ve unsuccessfully tried refinancing for a lower rate or longer term.
Even when all these conditions apply, you still need to ask yourself if you can realistically afford a settlement. To determine that, you’ll want to know how much your lender or collection agency will accept once your loans default.
Step 4: Discuss Settlement Options
When discussing repayment, collectors may first request full payment but typically shift into settlement talks, usually beginning with lump-sum offers.
You don’t have to counter with a figure immediately. Instead, explore your options: ask if you can spread the settlement over a short-term payment plan (typically a few months up to a few years), then propose a counteroffer that fits your budget and timeline.
Sallie Mae Student Loans Review
FAQ
What if Sallie Mae doesn’t budge?
Think about refinancing: If Sallie Mae won’t budge, think about refinancing with another lender to get a better rate or better terms. Settlement: More common with private than federal loans, the settlement amount varies. But be prepared for possible implications.
What if Sallie Mae doesn’t lower my student loan payments?
If Sallie Mae doesn’t lower your payments, don’t lose heart. It’s challenging — especially because Sallie Mae doesn’t offer flexible student loan repayment options like the federal government — but possible to negotiate lower monthly payments or even settle your debt. Here’s a roadmap for success:
What happens if a loan is denied by Sallie Mae?
Here are a few examples: Unemployment: If you’re unemployed, you may request deferment or forbearance from Sallie Mae. Other alternatives like refinancing your loans could be considered if this is denied. Death of the Borrower: If a borrower dies, Sallie Mae will usually forgive the current balance on the loan.
Are You facing financial hardship with Sallie Mae private student loans?
If you’re facing financial hardship with your Sallie Mae private student loans, know that you’re not alone, and options are available. Even though Sallie Mae doesn’t provide income-based repayment plans, it offers several programs for those struggling financially:
Does Sallie Mae collect student debt?
This is particularly true for unsecured, consumer debt, and less true with student debt. Sallie Mae stops trying to collect debts themselves fairly quickly, and they tend to outsource this to other agencies. Unlike consumer debt, Sallie Mae does not sell the debt to the servicing organization.
What happens if you default on a Sallie Mae loan?
Default: If you don’t pay back, the full amount is due and will show up on your credit report for up to seven years. Defaulting on Sallie Mae Loans also puts you at risk of having your wages garnished or a lien being put on your home. Loss of Benefits: You could lose access to deferment, forbearance, and other payment options.
Can you negotiate payments with Sallie Mae?
Yes, Sallie Mae typically negotiates student loan payoffs after your loans enter default, usually following 7 to 9 months of missed payments. Settlements typically range from 40 to 70 cents on the dollar, depending on your loan’s age and repayment history.
Is there a way to lower Sallie Mae payments?
Can you ask Sallie Mae for more money?
Loan amount changes can be requested by the borrower, cosigner, or school at various points in the application process. The borrower or cosigner can contact us to request to increase the loan amount.
What are the disadvantages of Sallie Mae?
- No prequalification option: Sallie Mae doesn’t allow applicants to check their rates or approval odds with a soft credit pull. …
- No parent loan options: Sallie Mae doesn’t offer parent student loans, so families looking for this option will need to consider other lenders.