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I’ve been looking at debt reduction companies and wondered about pursuing someone to fight for my loans. I did some research and was not confident to invest in them and not sure if it works. What are your thoughts?
I get a lot of questions about hiring a debt reduction company (or a lawyer for that matter) to attempt to negotiate a reduced payment on student loans.
In general private companies offering to reduce the amount of student loan debt you owe are either:
1. A total scam.
or
2. Not technically a scam but charge you legal fees for unsuccessful attempts to reduce your debt.
Student loan debt is not a particularly negotiable debt, especially federal student loans. For the most part borrowers can’t discharge student loan debt in bankruptcy so there is no incentive for anyone to negotiate. The government can garnish your wages and seize your tax returns to collect their money so there’s nothing driving them to reduce your debt.
I would advise extreme caution in hiring anyone to do any student loan debt reduction work for you.
Here’s an article from the Consumer Finance Protection Bureau about best practices for debt reduction organizations. It’s not specific to negotiating student loan debt but it has a lot of helpful cautions in it. I recommend taking a look at it.
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