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Hiring a professional negotiator to settle your private student loans is a big decision. As I’ve mentioned in other blog posts, a seasoned negotiator can help you save more than you would on your own (including their negotiation charge) – and also can make sure that the settlement is executed properly (which is just as important as negotiating the dollar amount).
The debt negotiation industry has been plagued with false advertisements, fake attorney models, and upfront fees hidden and wedged into debt negotiation programs in every way possible; even after the reforms of 2010 (known as the TSR Amendments or the Telemarketing Sales Rule) have taken place.
At least half the battle is going with the right company and making sure that they are true performance based negotiators (ideally with multiple financial certifications from an accredited agency), with zero upfront or hidden fees, and a full refund quickly processed from a third party escrow account if a settlement is not delivered.
Once that decision is made, the hard work begins – for the negotiator, that is. Clients who have properly vetted and researched a reputable private loan negotiator before hiring them can breathe a little easier once the client agreement is signed. However, clients must still play a very active role in their success, even though the negotiator largely takes on the burden of directly handling the private student loan after you sign on. Your negotiator will provide instructions that must be followed exactly, as even one slip up can result in additional unnecessary work for the negotiator at best – and a failed settlement at worst.
Here are the top 5 mistakes to avoid while working with a professional to settle your private student loans.
1. Communication Issues – Including Cosigners
This is one of the biggest issues I run into with clients, and it’s almost never intentional. People have busy lives, careers, families, etc; and sometimes keeping up timely communication with their negotiator can fall by the wayside.
Another huge aspect of importance is to communicate with your cosigners – before you decide to hire me, and during the course of my negotiations. When a debt collector gets an unsuspecting cosigner on the phone, they can leave the cosigner feeling upset and shaken – with the possibility of the cosigner inadvertently giving up valuable financial information that can hurt my negotiations, and even cause my negotiations to be set back by several months or nullify progress entirely.
Please advise your cosigners to either ignore the calls, or if they happen to catch your cosigner on the phone, have them tell the debt collectors to call me – and then have them hang up no matter what the collector says next. Some debt collectors love nothing more than to bully a grandma into giving over her personal banking info so they can start hitting her account for payments. Disgusting, yes. But unfortunately, it does happen in the debt collection world if borrowers and cosigners aren’t prepared.
Let your cosigners know what to expect when you sign on with me. Refer them to my website, or have them call or email me with any questions at any time during the process. I’m always happy to talk with them and explain our strategies and exactly what steps they should be taking as my negotiations are ongoing; since they are on the loans, after all.
2. Not Being Prepared When A Settlement Is Negotiated
Settlements are negotiated on a month by month basis – with debt collector deadlines occurring at the end of each month. Therefore, especially toward the end of the month, decisions sometimes need to be made on a shorter timeframe.
Whenever a good settlement is reached, it’s best to do everything possible to execute it that month, because the same settlement may not be available the next month. The account could be transferred to a different collection agency, or even a collection attorney, and they can refuse the previous offer; or we may have to renegotiate with the same agency or lender all over again.
Another dynamic that factors in to the need for frequent communication toward the end of the month is the deadlines debt collectors face and their need to make their individual and departmental quotas each month. Debt collectors may accept an offer a negotiator presents toward the end of the month – even if they rejected the same offer weeks earlier.
Clients need to be ready to take action on short notice to secure settlements and eliminate future risk and uncertainty – but this is only possible if they respond as soon as possible to phone calls and emails from their negotiator.
3. Not Having Funds Ready
This is another mistake that is often unintentional and can be caused by bank holds, delays in borrowing funds, etc. Your negotiator will check in with you periodically to see where you are at with your settlement funds. Most good negotiators will not negotiate prematurely and will wait until you have saved enough funds to begin serious negotiations. When I check in with clients and they let me know they have a lump sum available in a certain amount, or a down payment on a structured settlement, I then negotiate based on those facts unless the client tells me differently.
It’s really difficult as a negotiator when I work out an agreeable settlement with a lender or collection agent, only to find out that my client needs more time to get funds together than what they previously told me, or has spent some of their settlement funds without informing me. Even if I can negotiate the same settlement the next month, which is a coin toss due to factors I mentioned earlier; my credibility and leverage are diminished with the opposing party when I propose an offer that my client can’t accept. Building relationships with debt collection managers, supervisors, and even bank executives is a big part of my advantage – as long as they know that a settlement negotiated with me is a settlement that gets paid.
Therefore, it’s critically important to be completely forthcoming about your saved settlement funds and to immediately notify your negotiator if anything changes – and to do everything possible to maintain the funds that you have built your settlement strategy around until it’s time to settle.
3. Agreeing To A Structured Settlement You Can’t Afford
This goes hand in hand with the last issue. Structured settlements from 6-24 months with a large down payment (depending on the lender) are a unique way to negotiate a payoff with a large reduction, without having to come up with the entire lump sum settlement amount in one shot. For this reason, structured settlements are a great way for borrowers to settle as long as they have stable income that they can count on – and a backup plan if they can’t.
With the benefits of structured settlement comes a great risk – many lenders will void a settlement and apply all funds to the full balance if even one payment is missed during the course of a settlement term. A good negotiator will never negotiate structured payments that are too high for the budget you review with them. However, job loss and unforeseen expenses can threaten even a well planned structured settlement. Therefore, I only recommend that clients agree to structured settlements if they have a stable income – and also a backup plan like the potential to borrow from friends, family, spouse, or a line of credit if they have to.
4. Not Following Exact Settlement Execution Instructions
After I’ve negotiated and reviewed a written settlement offer that my client approves of, one of the most important aspects of private student loan negotiation is still yet to come – the execution of the settlement. I have a tested and proven settlement payment protocol that I have been successfully using for years; that if followed properly, will result in a settlement agreement being ironclad. Depending on the timeline involved, I will instruct clients to send their settlement payment via Priority Mail or Overnight Mail (also known as Priority Express). Despite the fact that I clearly say this in my settlement instructions and over the phone, there have been several close calls where clients send a payment by Certified Mail instead. The problem with Certified Mail is that it is sent at the pace of regular mail and is not expedited at all. Making the mistake of sending a payment by Certified Mail can result in what would normally be a comfortable deadline becoming a down-to-the-wire scenario. A nail-biter for everyone involved; these situations are not fun to deal with and can result in lost settlements.
Along with using the wrong form of mail delivery, another issue comes when settlements are accepted towards the end of the month and the client gets to the post office later in the day, on the last day to send the payment; and the Post Office can’t guarantee that it will be delivered on the due date even when using Overnight Mail (Priority Express).
Whenever possible, I recommend sending a settlement payment so that it is guaranteed to arrive at the collection agency at least a day earlier than the due date. This kind of issue happens more frequently with clients on the West Coast who are, for example, trying to send Overnight Mail or Priority Mail to a destination on the East Coast. However, this problem can occur regardless of location if a payment is sent late in the day via Priority or Overnight Mail. If a Priority Mail payment can’t be guaranteed in time, it’s no problem – the client just pays a little extra for Overnight Mail.
However, if the Post Office says that they cannot guarantee even an Overnight Mail (Priority Express) delivery by the due date, then there is a good chance that it won’t get there and it’s not worth taking the risk. The best thing to do at that point is to try to use Fedex, which guarantees next day delivery. If that still isn’t an option, after immediately calling your negotiator, go back to your bank, deposit the cashier’s check (as long as they will not place a hold on it), and then make plans to do the settlement payment by phone on the due date.
I prefer to send settlement payments by mail due to the paper trail and records of payment especially with third party collectors, but phone payments are usually okay when paying an original lender like Navient directly if we record and save the call.
A phone settlement payment that’s guaranteed to be processed on the due date is better than hoping for a cashier’s check to arrive without guaranteed confirmation by the Post Office for that due date. And don’t worry – I will be on the phone with you if you make a settlement payment by phone to ensure that everything goes as it’s supposed to. Afterwords, I send you the whole recording for your records (except for when you give them your actual payment information; at which point I pause the recording).
For mailed payments to third party collection agencies or collection law firms, clients can do their part by sending payments to arrive a day early if possible, or if they are doing Overnight Mail a day before the due date; by arriving at the Post Office first thing in the morning with their cashier’s check.
Another common mistake is addressing a settlement check to the wrong entity. Even though we may be negotiating with a debt collector, depending on their agreement with their client (the lender); we may be making the check out to the lender and sending it to the debt collectors’ office. This will be clearly spelled out in the settlement letter which we will review prior to sending payment; so make sure to double check this before mailing a payment.
Along these lines, we also have to make sure that payment is sent to the correct address. For Overnight Mail especially, collection agencies may have a different address they want us to use instead of their main address. Your negotiator will be aware of this and will let you know in the settlement execution instructions.
Not following settlement execution instructions can cause critical mistakes that your negotiator may not be able to resolve. Just recently, I had a very close call where a client mailed an Overnight Payment from the West Coast even though the Post Office told them that they could not guarantee it would arrive the next day. In fact, it did not arrive the next day, but the day after – one day past the due date. Luckily, the collection agency and lender still honored the payment and zeroed out the account on a sub 50% settlement, for which we obtained a verbal recorded confirmation. Had they decided to be sticklers about the due date, the situation would have turned into a stressful battle with regulatory complaints and calls to upper management in the collection agency in order to save the settlement and prevent the payment from being applied to the full balance – and maybe even the possibility of having to get an attorney involved. With settlement execution, it’s best to leave nothing to chance.
5. Not Allowing Me To Handle All Negotiations and Communications After Signing The Agreement
When my clients hire me as a professional negotiator, one of the binding terms in my contract is that the client agrees not to negotiate with the lender or collection agents, and to let me handle all communication once the Client Agreement is signed. If people want to negotiate on their own instead of hiring a negotiator, they certainly can choose to do that; even though a good negotiator can usually get you a better deal, even with their negotiation charge included; as the above real-life case study shows.
Once you’ve made the decision to hire a professional though, you have to be all in – because your negotiator will be. I can’t reiterate enough that this is an adversarial process – we are renegotiating the original terms of the credit contract in a way that the lender is not exactly thrilled with (but will still accept after months of convincing and strategic negotiating). Ultimately, it comes down to force of will, the negotiator’s belief in being able to overcome any obstacle, technical ability, past experience, and utilizing creditor relationships.
We need to stick together and be strategically disciplined in our approach to achieve the best settlement possible, and to make sure we encounter the least amount of stress (for my client and their cosigners) along the way.
My job, in addition to the negotiation and execution of the settlement; is to take on this burden for you. So there’s no need to worry about what the cubicle cowboy is saying at the other end of the line – it’s best to let me handle that.
If I thought that client communication with lenders before or once negotiations began would result in a better outcome, I would be all for it. However, this has not been the case, as I’ve seen time and time again over my 7 year debt negotiation career. Even some of the individual collectors I know very well and have done multiple settlements with can have a Jekyll and Hyde complex going on; depending on whether they are talking to a negotiator or attorney, or to the borrower or cosigners themselves. One collector in particular at a large collection attorney law firm is always really friendly with me, joking around, etc. I’d probably even go out to lunch with her, and she seems like someone I could actually be friends with (if we weren’t on opposing sides).
It wasn’t always like that in the beginning, and I even had to send in a few Cease and Desist letters (which only work for third party collection agencies) to get her to stop harassing my clients. By now we’ve done multiple settlements this year, and have developed some real rapport. She knows what I’m going for, and I know the lowest she can accept. I actually enjoy chatting with her. I still negotiate hard, but she knows that I know what is possible and what isn’t. So she doesn’t try to hardball or threaten me.
Yet, I’ve been told by clients that before they hired me, this same person said so many threatening and rude things that the borrower had trouble sleeping at night; laying awake and expecting the worst.
Debt collectors treat borrowers differently than an experienced negotiator or attorney – they will pressure borrowers rudely, lie to them, and make empty threats. They will hardball or even refuse to settle outright, offer higher settlement amounts, demand personal banking info for a same day payment, lie about false impending deadlines, press for sensitive financial information like tax returns and pay stubs, make threats of legal action that may not be happening in the near future (a potential FCDPA violation) and give advice that any certified credit counselor would be mortified by. Not to mention, via “skip tracing”, they can call your neighbors, parents, kids, relatives, and even your workplace to pressure you to call them back and accept whatever they are offering, from a weakened negotiating position.
The more devious debt collectors will even mention settlement (usually without sending a letter), and then set clients up for payments (usually by phone) while manipulating the process so that the payments go directly to the balance – not toward a reduced sum settlement. Without a written settlement offer and proof of payment, there’s not much the borrower can do if a debt collector rips them off like that when negotiating on their own, except trying to file complaints or spending even more money to hire an attorney.
Another big problem is that borrowers usually don’t have the experience in private loan negotiation to know which statements are fact, and which are fiction. Therefore, they can get rattled or give up valuable financial information that can impact the outcome of the negotiation – and debt collectors know exactly what buttons to push in order to get borrowers to divulge the information they want. They put on a tough guy (or girl) act – or sometimes, a good cop/bad cop tag team act.
When a lender or collection agent is able to get a borrower on the phone, it drastically reduces the negotiator’s leverage. Being the sole point of contact and maintaining strategic discipline with our strategy is one of the main things we bring to the table when negotiating with even the toughest (sounding) debt collectors.
All things considered, the lender or collector would much rather talk to the original borrower for the reasons I mentioned above. Quite simply, they will make more money and collect more for their company by intimidating someone who doesn’t understand the lender’s collection cycle, whether or not the debt collectors threats are real or fake, or the multiple steps to take to properly negotiate a settlement.
By taking a disciplined approach and allowing me to handle all communications, the debt collector or lender realizes that they will only be able to reach me – which greatly increases my leverage. If the debt collectors try to act up, we can find an attorney who specializes in debtor abuse and/or file a lot of complaints, and create a lot of headaches for a problematic debt collector’s upper management. That’s never my first choice – I’m always polite and as cordial as can be.. that is, until a collector tries an underhanded or unethical tactic with my client.
A Performance Based Settlement Program Is All About What’s In Your Best Interest
A good private student loan negotiator will have the experience to know what works and what doesn’t. Part of having a successful outcome is trusting your negotiator to do what’s best for you – which should be easier if you’ve done your research and hired someone who is experienced, certified, and successful at consistently negotiating private student loan settlements. Often, the difference between a stressful settlement experience or a positive, relatively easy one is following the gameplan and instructions that you’ve worked on with your negotiator, trusting them fully, and not hesitating to call or email them with any questions as you proceed down the path towards total annihilation of your private student loan debt together.
If you’re interested in settling your private loans for as little as possible, take a few minutes to fill out my online evaluation form today. A counselor or assistant will be in touch with you within one business day.
