What can I negotiate with Student Loans?

Michael Lux Blog, Student Loans 0 Comments

Some things are negotiable while others are not.  Most people know that the car dealership will probably be willing to accept a less than the sticker price on a new car.  Similarly, we all know that you cannot walk into Target and try to negotiate a lower price on pancake mix.  Unfortunately, not all purchases we make clearly fall into the negotiable or non-negotiable price category.  Student loans are one example of a transition that falls into a grayer area.  Can you negotiate interest rates on a student loan?  What about monthly payments?

It actually turns out that some areas of student debt are negotiable.  Today we will discuss when you can put your negotiating skills to work and the times that it won’t do you any good.

No room for negotiating…

The most common time that people want to talk their way into a better deal with student loans is when they first sign up.  In many ways it makes a lot of sense.  You have a company trying to earn your business, they offer you a certain interest rate, and you think coming back with a new proposal might save you some money.  Unfortunately, it doesn’t work that way.  Borrowers cannot even leverage an offer from one student loan company against another.  The rate you are given is the best rate you can get.  This is because lending decisions today are an automated process with final numbers determined by a computer.  Lenders do not empower any of their people to make better deals to entice customers.  There is too much risk for the lender to go this route.

Similarly, if you have been paying your loan for a while, and think you deserve a lower rate for your responsibility, you will likely find that you are out of luck.  As things stand right now, your lender is making money off the loan, and even though the consolidation marketplace is quickly growing, most lenders do not fear you taking your business elsewhere.  Sadly, you cannot turn a solid payment history into lower interest rates with your current lender.  If you do have a great payment history, you may want to try looking into a new student loan lender through student loan consolidation or refinancing.  With a huge list of student loan consolidation companies, there is potential for savings, you just have to be willing to take your business to another lender.

Time to strike a deal

The only time lenders are willing to entertain any sort of negotiations is when things have gotten really ugly.  If there is a genuine question as to your ability to pay, a lender may lower your interest rate or accept less than a full payment.  For example, Navient has a Rate Reduction Program for borrowers who have fallen behind on their student loans.  The negotiation aspect comes when discussing your ability to pay.  If you can show that an extremely low interest rate is the best chance they have at collecting the debt, you could save yourself a bundle of money.

Similarly, the longer a loan has been in default, the more likely a lender is to accept less than full value for repayment of the debt.  Obviously tanking your credit score and raking up late fees is a terrible way to try to save money; so going this route intentionally would be a horrible mistake.  That being said, if you ever have a terrible hardship and end up in default, know that there could be room to negotiate a better deal for yourself.

Bottom Line

Most of the time there is very limited room for negotiation in the world of student loans.  While there are a couple notable exceptions, the majority of the time, the price you are given is the price you must pay.