How to Negotiate With Creditors to Reduce Your Debt

"It would be hard to overestimate the impact of a crushing burden of debt. It can be a hole that gets deeper even after you spend years trying to fill it in," The Wall Street Journal reports.

..."Student-loan recipients are currently stuck in legal limbo, waiting for the Supreme Court to rule on the legality of President Biden’s plan to forgive up to $10,000 per person in federal loans and up to $20,000 in federal loans to borrowers who also received Pell Grants. Meanwhile, the pandemic-era payment pause was extended to June 30 or until the legal challenges are resolved—whichever comes first. (If the litigation hasn’t been resolved by June 30, payments will resume 60 days after that.)

For now, borrowers can assess whether their monthly payments are still manageable once the pause ends. If not, contact your loan servicer and inquire about deferment and/or forbearance options, as well as other repayment plans.

'I would recommend exploring income-driven repayment plans,' says Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators. Since monthly payments are generally based on the borrower’s discretionary income and family size, 'the repayment amounts can be as low as $0, but still be considered in [satisfactory] repayment status,' she says.

Another option is to apply for a federal consolidation loan that combines multiple student loans into a single loan, possibly with a lower total monthly payment. However, these loans typically lengthen the repayment timeline, so the borrower likely faces more principal and interest payments. Consolidation loans are also available from private lenders, but many lack the income-driven repayment options and eligibility for public-service loan forgiveness.

Nurses, teachers, public-service employees, military personnel and others may be eligible for public-service loan forgiveness. Disability and other hardships will also be considered for forgiveness.

Continuing to miss payments will likely lead to default, at which time the entire balance of the loan, with interest, becomes due. Defaulting also erases eligibility for loan deferment, forbearance and forgiveness, as well as access to federal student loans in the future. The borrower’s credit rating is dinged, and the government can withhold tax refunds and garnishee wages.

Don’t let it come to that, Ms. McCarthy says. 'It’s possible to get a lower monthly payment amount that will keep you in satisfactory repayment status, which is the No. 1 goal here.'"

NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Articles included under the notable headlines section are not written by NASFAA, but rather by external sources. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.


Publication Date: 2/20/2023

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