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I have a debt that has been in collections for a significant period of time (>10 years). The debt is from a college loan that defaulted when the lender (a private school) didn't send the deferment papers to my correct address.

As a result, the original loan amount (approx $17,000) was placed in collections. I started making payments right away ($150/mo) and have been paying that amount for more than 10 years, but the principle has only been reduced by about $5000. I have around $13,000 remaining in collections.

My credit is excellent, 760+ and the debt is not being reported on my credit report as far as I can tell. I really want this debt off of my mind and my life...

How can I negotiate with the collector? I have a feeling that if I called them up and said "I can give you $7500 for satisfaction in full of this debt" they would say "well if you have $7500 you can send that to us and continue making payments". Now I've exposed my hand (that I have extra money) and they still hold the chips... I'm assuming that they paid pennies on the dollar for this loan and are well into the black on the account.

Should I get a professional to negotiate this for me? What type of professional deals in that service?

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As you state, you don't really have negotiating power at this point. So how do you get it back? Answer: stop paying. Hopefully, they start calling you right away and similarly stop taking their calls. It might take a year or more of this.

In the meantime start saving money. Eventually take one of their calls. Talk to them, say look I am not going to pay on this anymore. I can offer you 2347 today to settle this debt in full. That is all the money I have, but I want this gone out of my life. They will probably say no, okay try again next month. Hang up.

Next month offer them less. Complain about some unexpected cost. Eventually you might get settled around 6K, take that offer. Some companies even offer this kind of deal without negotiation. They just send you a letter that says the bill will be paid in full if you send them 50-75% of the balance today.

How is your payment being made? Are you sending it to them? Hopefully you did not give them access to your checking account. If so you will need to close that account. If it is on a credit card, you may want to report it compromised.

First get your power back, then follow xyious' advice.

Offering an odd amount like the one I stated indicates that you don't have anymore. When you say 4300 people might wonder if they can get you to 4350. If they can, how much higher can they get you to go? Once you state an odd amount, people tend to believe that is your limit.

  • Though I suppose that strategy would tank his credit score if he needed good credit for something... – Jeff O'Neill Jan 23 at 19:53
  • Unfortunately I don't want to destroy my credit by stopping payments (especially for a year or more). The payments are done with my banks bill-pay feature (it sends them a check). I declared bankruptcy about 12 years ago and just got my credit back to where it needs to be. – Roy Jan 23 at 20:58
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  1. Get everything in writing, don't make an extra payment without a written agreement.
  2. If you offer them $7500 for the complete satisfaction of the debt and they decline your offer you don't have to increase your payments. You can just tell them "OK I will just continue to make these payments for the next 10 years".
  3. You probably shouldn't offer $7500 anyway. If you think they're already in the black on the account you might get away with a much lower offer.
  4. If you call them, make sure you're actually talking to someone who is in a position to negotiate. Sometimes they like to make it sound like they are, but they're not. This should be resolved when you ask them to put a binding resolution in writing.

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