your free resource
I created this page as a resource for my fellow federal student loan borrowers (I have upwards of $50k in federal loans myself). We believe that most federal loan programs are not that difficult to evaluate and apply for on your own, once you have the right information.
However, we do either advise or refer borrowers with complex federal student loan issues, such as wage garnishment, on a case by case basis. Contact me if you’re unable to resolve your federal loan issue with the information on this page.
Federal loan settlement is very difficult and rare, but it can be possible to settle federal loans that have been refinanced into a private loan.
Below I will provide some more information on how to get a handle on your federal loans and find the best available options for you.
Not sure whether your student loans are private or federal, or if they are in default? Read this article – How To Tell If Your Student Loans Are Private Or Federal.
If they are in default, follow the steps listed in this article I wrote for Yahoo Finance, in order to evaluate your best option for getting current again – How To Get Your Student Loans Out of Default (Without Getting Scammed).
Set up your FSA ID if you haven’t already. You will need this to login to www.studentaid.gov, the main website to access federal student loan data, and apply for Direct Consolidation and the various repayment plans.
If you’re a third party trying to do this for a borrower – don’t. It’s illegal and you risk fines and even prison time according to the FSA ID setup page.
Then, click here to read this blog I wrote about the various repayment plans available – How to Evaluate and Apply for The Best Federal Loan Repayment Plan For You (Without Getting Scammed). Typically, the income-driven repayment plans are a great choice especially if you need lower payments.
If you’re still not sure which repayment plan you want, click here to use the free Loan Simulator tool to evaluate your options. Keep in mind that if you have FFEL, Perkins, or other types of loans, you may first need to go through Direct Consolidation (also available on studentaid.gov) to become eligible for certain plans (such as RePAYE).
If you’ve evaluated your federal loan repayment options and nothing seems to help significantly, you may be thinking of “outside refinance” which converts federal loans into private loans at a lower interest rate.
It can be possible to refinance to settle, but this is a complex strategy – please consult with me first.
What to know about refinancing a federal student loan into a privately backed loan:
➡️ You will lose eligibility for federal income related payment plans
➡️ You will lose eligibility for Public Service Loan Forgiveness if you qualify
➡️ Your loan will permanently be converted to a private loan
➡️ Generally, you will be trading more flexible payment and deferment options for a lower interest rate and lower total payoff
Refinancing through the Credible Refinance Marketplace
Still interested? I’ve partnered with Credible, a refinance marketplace that helps borrowers compare multiple options without a hit to their credit.
I chose to partner with Credible because I like that they present the available options based on the borrowers information only – it is objective and no lender is weighted over the other. This aligns with my philosophy as a Certified Credit Counselor.
There is no “best” refinance lender – but there is a “best” refinance lender for you and your personal circumstances and variables. Credible will help you find it.
Note: I receive a minor commission for anyone who is approved for a refinance through this link, completely independent of which lender you actually refinance with through the Marketplace.
Are you interested in settling your federal loans? It isn’t easy, only possible when they are in default and reductions are usually minimal (unless you have discontinued federal HEAL loans).
The only other way to settle a federal loan is to refinance it to a private lender first. This approach is complex and does not come without risks. Contact me first if you’re considering this.
Keep in mind that within the federal loan system:
➡️ Federal loans do not offer structured settlements
➡️ We do not ever recommend a strategic default to settle a federal loan (default fees = settlement savings on newer defaults)
➡️ Most reductions are 10-20% except in rare cases with very long term defaults and large amounts of accrued interest.
Mortgage professionals -The interaction of mortgages and student loans is unique and complex. For more information:
This is the most comprehensive resource I’ve found regarding federal student loans and mortgage applications/financing.
Still not finding the information or answers you’re looking for?
I do not have any relationship with the Department of Education or any government entity. Nothing on this page constitutes a direct offer/guarantee of financial counseling or the initiation of a client relationship with Andrew Weber Certified Credit Counselor.