Can You Settle HEAL Loans?

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The short answer is yes. Although very few experts have direct knowledge or experience in working with HEAL borrowers, HEAL loans can be settled! Read on to find out how and what to expect with a HEAL loan settlement. 

First, a little about Health Education Assistance Loans: 

HEAL loan options were originally created for health professionals to further their education in medical school. These are a unique subset of federal student loans created in the late 70s and discontinued in the late 90s. 

Because this program was created prior to the Department of Education, they are not as streamlined, even though the Department of Education eventually took it over. This type of student loan debt was created by private lenders and guaranteed by the federal government; so in this way they are similar to the FFELP program (which has also been discontinued). 

Unlike FFELP federal loans though, HEAL accounts can be settled for significant discounts. This is a process that is unknown for the vast majority of debt experts, and forget about the average collegiate debt relief company having any knowledge of this program whatsoever. These programs are not eligible for the normal Income-Driven repayment plans, and even though the Department of Education has taken over these accounts, they do not offer the same relief as they do for other federal student aid borrowers.

As an expert debt negotiator who has settled millions, I’ve talked to thousands and thousands of borrowers over the last decade. One of my most interesting conversations was with a doctor who had been able to settle for a vast discount – much, much lower than federal balances settle for and even lower than the normal range for private loan settlements (read on for the exact percentage of her settlement). This really piqued my interest at the time, and I began researching further about the HEAL program.

Next, the bad news: HEAL accounts have indefinite statutes of limitation and collection 

Although the program was discontinued, like all federally guaranteed debts, there are no statutes of limitation and the federal government will use aggressive collection tactics to try to collect over an indefinite period of time. The important thing to keep in mind is: this will be an ongoing problem during a medical professional’s career, and even during retirement. They simply do not go away. 

What kind of collection activities can HEAL borrowers face?

  • Assignment to a collection agency
  • Lawsuit and judgment in federal court
  • Offset of tax refund
  • Prevention of Medicare acceptance at the medical professional’s practice
  • Publication on the infamous HEAL student loan default list

So how do you resolve them and prevent further negative consequences?

Unless you’re actively facing litigation on these accounts, you don’t need a student loan attorney for settlement. What you do need is a world class student loan negotiator who has experience with a wide variety of settlement scenarios to help you negotiate the lowest possible settlement, and to make sure the negotiated agreement is executed properly. 

There are some types of accounts where it’s possible to try to settle on your own: a small credit card debt with a non-aggressive lender, a past due medical bill, etc. For large balances, there are high stakes significant consequences if the settlement isn’t executed properly – you need a professional. Along with saving you the time and effort involved, there’s simply no replacement for the level of expertise that a debt expert with millions in loan debt negotiation brings to the table.

It really evens the playing field and saves you the stress of negotiating with a debt collector – and for larger accounts, collection agencies make sure that their pros are the ones involved. A professional collection agent spends at least 8 hours a day, 5 days a week, honing their craft – often for years. Trying to go head to head with someone like that in your first major debt negotiation is a recipe for disaster. Even if debts are reduced enough, the follow-up is often where people get into trouble. 

With these types of accounts, the execution followup would include removal from the HEAL default list, and making sure that there are no further collection activities. If for some reason the debts are still reporting on credit, then it’s important to make sure that is notated correctly as well. However, this is unlikely because even though they have no statutes of limitation, credit reporting timelines dictate that accounts fall off reports after 7 years from the first missed payment.

Are there any other ways to get relief?

Unfortunately, there aren’t many available avenues for loan repayment assistance to really resolve a HEAL default in it’s current form. Forbearances are generally unavailable, Income-Driven Plans aren’t either. Forget about Rehabilitation. HEAL accounts do not qualify for any type of student loan forgiveness or loan forgiveness programs. Bankruptcy is generally not possible and reported to be even more difficult than for normal federal loans, which are notorious for the difficulty of discharging in bankruptcy.

However, it can be possible to go through Direct Consolidation to be come eligible for all of the normal relief options that “normal” federal accounts have. By doing this, they fully converts to Direct Loans and you lose any chance of ever settling it for a fraction of the balance. It would re-report on your credit, and you would have to sign up for a repayment plan (once the pandemic forbearance is over). 

Consider carefully before going through Direct Consolidation for a HEAL loan. Student loan settlement at a massive reduction is possible on these loans, and by going through Consolidation, it will make the entire balance plus late fees become the new actively reporting balance on your credit. There is no real chance of federal loan settlement on an account that’s brought current, so this permanently removes that option. For borrowers with smaller balances or those who can’t afford to settle, this could be a good option to get the account current and off the HEAL list and enter into normal student loan repayment. 

How to decide: Settlement or Direct Consolidation?

For those with larger balances, evaluate whether you want to begin repaying on the full balance plus late fees instead of potentially reducing it by more than half the balance and moving on with your life. If a larger balance is currently not on your credit and is reported when brought current (which will happen), this can drastically affect your Debt to Income ratio and could have a negative impact on your credit as it will look like a new installment loan, with no previously reported credit history prior to when it is brought current. 

However, this does open the door for normal federal loan relief options – and permanently eliminates the option of a drastically reduced balance. A careful evaluation of your current and future financial situation is a good idea when considering these two options. Federal loan settlements are generally only for accounts that have been in default for many years, with the reduction mainly being a removal of late fees and some interest that have accrued after default

With HEAL accounts, the chance for a massive settlement could be a once in a lifetime opportunity. 

If you can afford a lump sum payment, you can resolve the HEAL account for far less than the balance instead of creating a new burden by taking it out of default via Direct Consolidation. If you have the settlement money to fund the loan debt settlement, the savings are tremendous and unlike anything available for normal federal loan benefits.

I’m here to help:

As one of the top loan negotiators in the US, I will use all of the strategies, experience, relationships, and negotiating tactics that I have developed over a decade long career to settle for as low as possible. And if I’m not successful, you owe me nothing – that’s the beauty of performance based negotiation. 

Remember in the beginning of this article when I said to read on to find out the exact percentage of the settled account for the doctor I spoke to?

It was 26%. 

The fact that a settlement that low was possible (on a federal debt with no statutes of limitation) absolutely blew my mind. 

Click here to request a free evaluation on whether settling your HEAL student loan default is the right move for you, or give me a call right now at 937-503-4680


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About Andrew Weber, NACCC Certified Student Loan Counselor

Andrew Weber is a NACCC Certified Credit Counselor and a NACCC Certified Student Loan Counselor. He is the only certified student loan Counselor who specializes exclusively on private student loan issues in the US. He's helped over 2,500 borrowers drastically reduce their debts.

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