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Got Student Loans? Learn How to Negotiate the Debt!

written by: Kristie Lorette•edited by: Jean Scheid•updated: 8/24/2011

If you are preparing to enter into the negotiating process with your student loan lender, you better go in prepared. Learn the primary reasons lenders allow you to renegotiate your students loans, make sure you fit the bill and then uncover your options.

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    Learn the art of negotiating your student loans. Photo by: imelenchon You take out student loans to get your education and as you graduate you wind up with student loan debt. Some graduates simply start making the student loan payment the six months or so after graduation when the first payment comes due. Some even continue on this path until one day something causes the borrower to not be able to afford making the student loan payment anymore. What is then required of you, as the borrower, is to learn some tactics for negotiating student loan debt so that it is affordable to you, but still allows you to be responsible for paying back the debt you incurred to obtain your education.

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    1. Prove Financial Hardship or Extenuating Circumstances

    While negotiating student loans may sound like an easy task, it typically is not. Since most students loans are federally funded, the federal government is not easy to forgive debt for just any old reason. Under specific circumstances, however, student loan lenders and providers will work out a deal with you as the borrower so that you can still pay your obligations and the lender still receives all or a major portion of its money back.

    First, you have to prove you have a financial hardship or extenuating circumstances. Before you even pick up the phone to start the negotiation process, however, you better have a valid reason, such as a major financial hardship or some kind of financial hardship that is prohibiting you from making your student loan payments in the first place.

    Typically, this includes situations such as:

    • Loss of a job
    • Death of the borrower or major breadwinner for the household
    • Returning to school
    • Major illness/disease/medical bills/expenses that are out of your control
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    2. Agree to Your Debt Responsibility

    Once you get the lender on the phone, assure them you want to pay and that you want to take care of your financial responsibility. The art of negotiating is to own up to your responsibility, state your case and remain nice and calm. Avoid getting nasty or being rude because it is likely to get you the direct apposite outcome than you are seeking. Although you want to own up to your responsibility, let the representative know that you need to make some kind of arrangements that are mutually beneficial to you and the lender.

    Let the representative for the lender know there is something going on in your life at the moment that is prohibiting you from doing so, however. Find out from the lender’s representative what kind of options may be available to you. Different lenders and different situations warrant different options.

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    3. Lump Sum Payment Option

    Two of the primary options you should negotiate to receive include:

    • A lump sum payoff
    • Reduction of the total balance

    A lump sum payoff requires you to pay the student loan balance fully, but at a lower balance than what you currently owe. The second option is to get the lender to reduce the total balance you owe. Decreasing your total balance will also decrease the monthly payment that you owe the lender. Either way, you end up paying less interest on the student loan amount in the long run.

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    4. Negotiate Payments

    Another option to negotiate with the lender is to base your payments on your income. The lender uses your current income and your monthly expenses to calculate how much you can afford to pay toward your student loans. This option will require you to prove to the lender what your income and expenses are so they can calculate how much you can afford to pay in student loan payments.

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    5. Request a Deferral

    Finally, you can request a deferral of your student loan payments. A deferral puts your student loan payments on hold for a set period of time. Some lenders defer payments for six months to a year. Other lenders may work with you to defer your payments until your financial situation changes. This option provides you with a chance to get back on your feet, so you can return to making your normal student loan payments.

    No matter which option your negotiating student loan lands you, the lender is not simply going to take your word for the need to enter into negotiations. No matter what your reason is for trying to lower the balance you owe, defer your student loan payments or lower the monthly payments you make to the student loan lender, you will be required to prove that you have a need to make the change in terms and conditions that you originally agreed to abide by.


  • Photo:

    Your Finish Rich Plan (June 26 2009) retrieved at

    McAllister, Barb - Self Growth - retrieved at