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Posted in Student Loans
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Question By
TimHenn

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Student loan in default - payments, pay-in-full or settlement?
I'm the co-signer on a student loan that went into default before I could prevent it. I immediately setup monthly payments that are 25% higher than the original loan payment. There is no option to "Rehabilitate the loan" with Wells Fargo so I have three options:
1.) Make the payments monthly till paid in full
2.) Pay the entire loan amount in full
3.) Settle by paying 65% of the outstanding balance

I, up until this loan situation, had very good credit. Now I don't. Which one of the options above would serve towards fixing my credit, if any?

Note that option 3 will be reported to the credit agencies as the loan closed but not paid in full; doesn't sound like a good option from a credit history standpoint.

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Did the loan servicer give you the option of settling the account by paying the 65% of the balance, and is this in writing, because student loans generally are collectable until paid in full?  If you have this in writing, pay the 65% as long as it settles the entire debt.

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TimHenn

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I think I can get it in writing but they made it clear the debt will show as settled for an amount less than the original amount. I'm thinking that might be worse than paying it down.  If this settles "the entire debt" but is footnoted as settled, paid less than the amount owed do you still think this is the best path?

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