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Posted in Student Loans
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xtrn

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Defaulated Federal Student Loans Pif or Settle?
In 2012 I took out some student loans. Went through a rough patch and couldn't pay them back. They defaulted and went to the department of ed. Now there with a collection agency. I called today and they want 4500 to settle or 5500 to pay in full. Saving 1000 would be helpful but I'm trying to get my score up quick and this is my last debt to payoff. What one should I do? Any jump in my credit with paying these two off? (Currently at a 586).

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If they are offering a settlement, take it!!!! Otherwise those loans will remain collectable until paid no matter how long it takes.

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xtrn

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I'm trying to boost my credit up I just paid my 2 cc off in the hopes I could get a auto loan by December. Would you say pif or settle?

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If they said they would settle for $4500 NOW instead of waiting until you were able to pay the $5000, that would settle the whole debt, and that would be the smart thing to do.  Another smart thing would be taking the time to read the articles on this site so you can have a good understanding of how credit works and this information will help you for the rest of your life. 

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The key is to pay them off.   They will be marked closed.  Even if it is marked settled/closed, its the same effect as if its paid/closed.   The fact that it is paid is what counts, if you can pay the settlement, make it happen.   While you are at it, go ahead and ask them if they will also delete the record for that settlement amount.

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Your credit scores won't necessarily get better as vast majority of credit score models dose not distinguish between paid and unpaid collections. However, paid collections looks tad better in some potential creditors' eyes and prevent current creditors taking further actions.

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You can always ask for a "pay for delete" deal in writing, it works on very limited basis, won't hurt to ask.

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Planning to Return to School?

What others have not mentioned here is the impact this will have if you plan to return to school for additional degrees/certificates.  I would definitely verify whether or not the "settlement" will effect your ability to borrow future student loans should you need to.

Contact the Department of Education and ask them if you would be eligible to borrow in the future shoud the need arise.

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