Your loan is “guaranteed” by The Education Resources Institute (TERI). It is a private student loan, as it was not guaranteed by the U.S. Department of Education (DOE). It is common for confusion to exist as to whether a particular student loan is a private loan or a federally insured loan. Many student loans, such as Stafford Loans, and PLUS Loans, are offered by private lenders, but are still guaranteed by the DOE. As I mentioned, yours is not.
How Settlement Programs Work
Your problem is one faced by almost every consumer who enrolls in a debt negotiation program, and one most good debt settlement firms discuss with clients upfront.
While in a settlement program, you are no longer making monthly payments to your creditors. Instead, you are saving that money in an account to be used to settle your debts; however, your enrollment in settlement program does not stop your creditors from expecting payment each month under your loan agreement. Therefore, your creditors will likely continue their collection efforts while you are saving money to settle, as TERI has already done.
The fact that collectors are calling you and making threats is par for the course for most people enrolled in a debt settlement programs. It does not mean your creditors will refuse to accept a settlement. In addition, your settlement company may be able to help reduce these phone calls by sending cease communication requests to your creditors. TERI, being an original creditor and not a third-party collector, may choose not to honor these requests, but TERI may stop calling to ensure compliance with federal and state collection laws.
I encourage you to communicate with your settlement company about these calls and how much stress they cause you. It may also be a good idea to stop answering the phone when collectors call. If you do not have the money to pay them, all these calls will do is cause you unproductive stress.
Although it does not happen to most people who enroll in debt negotiation program, your creditors may choose to pursue legal action against you for not repaying the loan as required by your original agreement. From my experience, only a relatively small percentage of debt settlement clients are sued, though almost all are threatened with lawsuits by their collectors.
Collectors often tell people they will not work with a debt settlement company. This statement is a negotiating tactic. Although a few do not under certain circumstances, the vast majority of creditors will negotiate a settlement eventually because it is in their financial interest to do so.
Student loan providers can be more difficult than other creditors when it comes to negotiating settlements, possibly because they know that their notes cannot be discharged in most bankruptcy proceedings. In fact, many debt negotiation firms will not accept student loan debt, even in cases, such as yours, when the student loans are private (i.e., not insured by the U.S. Department of Education).
I presume that since your debt negotiation firm accepted your TERI loans, it has a track record working with TERI or similar providers of private education loans. However, you may want to call the settlement company with which you have been working to ask specifically how many accounts it has settled with this creditor, what the average settlement percentage on those settlements is, and how often are clients being sued by TERI or similar private education lenders.
Hopefully, this information will help you decide whether or not you should continue the negotiation program or try to work out repayment plan with TERI on your own.
Alternatives to Settlement
If you feel strongly that the debt settlement program in which you have enrolled will not settle your TERI account, you may want to look into a couple of alternatives. Unfortunately, the alternatives available to assist you in resolving your student loan debts are fairly limited.
One option is to try to consolidate your loans into a single debt, which will hopefully charge a lower interest rate and require smaller monthly payments. However, since your loans are private, you probably will not qualify for federal consolidation programs, which may make consolidating a less attractive option. To find out more about consolidating student loans, read the Bills.com resource Student Loan Consolidation.
Another option is to consult with a bankruptcy attorney — bankruptcy usually cannot discharge student loan obligations, but if you can prove to the judge that repaying the debt is causing you an “undue hardship,” he/she may grant you a discharge. Hardship discharges are not granted frequently, so you should not peg your hopes on this option.
If you are considering bankruptcy, I strongly encourage you to consult with an experienced bankruptcy attorney as soon as possible.
While there are options out there to help you, you may find the best thing to do is to stay in your settlement program, cross your fingers, and hope that everything works out for the best. If you want to learn more, Bills.com offers a wealth of information on various student loan related topics, available at Student Loans Information and Savings.
I wish you the best of luck in finding a solution to the difficulties you are facing with your student loans, and hope that the information I have provided helps you Find. Learn. Save.