Q. I used a medical bill advocate to help negotiate health expenses, and they saved me thousands. Is there a similar service for credit card and student loan debt? Due to my medical expenses and job loss, I put my student loan on forbearance several times and made minimum payments on my credit card. I do not qualify for a balance transfer for my credit card because I have a bankruptcy on my record.
A. You’re in luck.
There are companies that can help negotiate your credit card debt, but each works a little differently.
With credit card debt, you have two choices, said Gerri Detweiler, director of consumer education for Credit.com.
One option is to use the services of a counseling agency.
“You won’t generally be able to reduce the balance you owe that way, but your interest rates will often be lowered and some late fees may be waived through a Debt Management Plan (DMP),” Detweiler said.
She suggests you read this report, which describes the typical reduction for consumers in a DMP.
The other option is a debt settlement agency, which will try to help you negotiate reductions in the total amount you owe, Detweiler said.
The Trouble With Student Loans
“You’ll have to stop paying and default in order to negotiate settlements so it’s not always a good option for all consumers — and there is no guarantee you will be successful,” she said, noting there was a lot of abuse in the industry before regulators cracked down on them.
Student loans are trickier.
If they are federal loans — and it sounds like they are because they are in deferment — then it’s often hard to negotiate, Detweiler said.
“There is no statute of limitations and the federal government has strong collection powers,” she said. “Private loans may be negotiated but usually after they are in default.”
Detweiler said you may want to look into income-based repayment, which could reduce payments to zero. She said it’s not a panacea, but may be an alternative to deferment.
Finally, depending on your total debt, you may want to consult with a bankruptcy attorney.
“Sometimes consumers try to get temporary relief but just postpone the inevitable and end up filing anyway,” she said. “It might not hurt to get an evaluation.”
More on Student Loans:
- How Student Loans Can Impact Your Credit
- A Credit Guide for College Graduates
- Strategies for Paying Off Student Loan Debt