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From Student Loan Shame to Financial Freedom: How Erica Saved $100,000 with a Private Student Loan Settlement

May 21, 2020

Welcome to this case study of Erica’s private student loan settlement process with Navient

Click here to read a complete guide to negotiating settlements with Navient. You can also read this guide about student loan settlements in general. Let’s talk when you’re ready for expert help negotiating your settlement.

I’ve always been able to make more money probably than the average person — not to be cocky, I’m just saying. I always felt that I would be able to fix [my student loans]. Instead, [they] knocked me on my butt.

Erica A.

Erica A. works for a small company in Lufkin, Texas, about two hours outside of Houston. Her official title is general manager, but she’s basically a jack of all trades at work. She does some business operations management, some technical operations management, as well as project management.

In short, Erica is a boss.

But that wasn’t always the case.

The trouble started with the school where Erica earned her bachelor’s degree. It was a private school, which added to the expense.

I didn’t realize it at the time, but I wasn’t making very good financial decisions.
Erica A.

“I was in my late twenties, I owned a home, I was working full-time, and I had a real estate company. During the last year and a half of school, in order to keep up my grades, I was unable to work as much as I had been. So I put some of the student loan money toward my living expenses, some of it towards getting a broker’s license in real estate, and some of it to get other related licenses and credentials. I didn’t realize it at the time, but I wasn’t making very good financial decisions.”

Erica went back to school to earn a second bachelor’s degree in nursing, which was what she’d first pursued right out of high school. But ultimately, she didn’t finish that degree program for health reasons.

“And then I just had to get back to work and figure out how to pay off all that debt,” she says. “The original amount was about $113,000. And over the years since then, I paid back all of that money. It had been 30 years, but I was still making payments.”

Thirty years??? As in 3-0? As in Three MF Decades!?!

Yep. Thirty years after taking out her first loan, Erica had paid the principal back plus interest.

When she contacted Tate, her balance was still around $175,000 because of high variable interest rates of upwards of 16%.

And the interest would continue to pile up as long as she carried a balance.

“It was astonishing to realize just how much interest accrued during that time,” Erica says.

“I just didn’t anticipate that. I thought, ‘Well, I’ll be able to pay it off.’ I’ve always been very fortunate. I’ve been hustling to work since I was old enough to have to work, and I’ve always been able to make more money probably than the average person — not to be cocky, I’m just saying. I always felt that I would be able to fix it. Instead, it knocked me on my butt.”

‘I felt a lot of shame’

On her own since age 19, Erica incurred student loan debt at more than one school, because it took her a while to decide on a career path. “The highest level of degree I have, which is unusual for the level of debt I had, is a bachelor’s degree in business management.

Older woman standing along rail
This isn’t Erica; this is a model. But I needed an image, so thank you @bbh_singapore

I thought, ‘How did I get myself into this mess?’

I felt a lot of shame.

I was very embarrassed. In my family, I’m known as the go-to person to solve all of the problems. And I felt trapped. I had been making a really good faith effort to pay the loans off; that was important to me. I borrowed the money, I wanted to pay it back.”

Erica was making really large payments just to meet the minimum payment that was due. Of that money, literally zero to $100 would be applied toward the principal.

Understandably angry and frustrated, Erica reached out to Navient to see if there were any alternatives, any way to reduce the interest rates.

Navient Offered No Help

“Dealing with Navient, I felt like I was dealing with the mafia,” Erica says. “They would not budge. So I considered refinancing, but decided against that because I’d just be taking that whole balance and moving it somewhere else. That wouldn’t solve the problem.”

Navient offered Erica a temporary rate reduction plan of 1-2% interest a few times, but she found them to be unethical and dishonest. “Different people would tell you something different every time you called. For at least a year, I thought I had some relief. They were auto drafting my payments for probably six or seven months, as agreed upon. No phone calls, no letters, everything’s going as they had told me that it should. But start getting collection calls in the midst of what I thought was a rate reduction plan.

“They said, ‘You’re behind.’ I said, ‘How’s that possible? I’m on this plan. No one’s called. The money’s coming out.’ Then I would get put on hold, and they would say, “Oh, your payment bounced.” Well, it didn’t, and I’d have proof that it cleared. ‘Oh, well it’s this or that.’ They had a lot of problems in their system.”

‘I was basically paying a mortgage payment’

At one point, Navient denied that Erica was even on a rate reduction plan. They said she owed the difference between what she should have been paying and what they had been auto-drafting. And they reported the payments 90 days late on Erica’s credit report. Finally, they refused to set up another reduction plan, saying she made too much money.

Towards the end of 2016, Erica’s monthly loan payments were upwards of $1,200 – $1,900. “I was basically paying a mortgage payment,” she says.

Erica considered her options. Filing bankruptcy was out because she didn’t meet the criteria for a chapter 7 bankruptcy, and even if she had, student loans are difficult to discharge in bankruptcy.

She had also read some articles about people doing strategic loan defaults, a risky option that can put the borrower on the path to a settlement. Erica decided to give it a try, so for about six months, she quit paying on her loans, even though she could afford it. She took the hit to her credit score and learned to ignore the collection calls.

But then Navient started calling her family and that added to the stress. “Finally, I asked them about a settlement. The lowest I could get them to offer was 60-65% of the $175,000 balance. But then they offered me another rate reduction plan, and I took it. I thought maybe I could just regroup, save some more money, and look at it from another angle later. I needed my credit to be solid because I had things I wanted to borrow for. So I resumed making payments.”

A Christmas promise

Last Christmas, Erica took herself on a trip. “I felt blessed that even though I was paying all this money, I could still travel. I drove the same car for 15 years, but I could still do things for myself. And I told myself while I was away that this time next year, these loans are not going to be a problem. Somehow or another, this problem is going to get solved. And Tate was the one who helped me do that.”

Erica’s balance was still $175,000 when she called Tate in February 2019. She decided to default again, but this time with his help.

“So I submitted my information to Tate, and that process was incredible,” Erica says. “It was so professional and streamlined. I’m a detailed person, so I gave him all the information up front to make it easier for him. He told me exactly what I could expect and what he charged. And then he took over and they quit calling me.”

Three years after trying unsuccessfully to get a settlement on her own and eight months after hiring Tate, Erica settled the $182,582.48 she owed for a lump sum payment of $82,100.00.

Keep calm and call Tate

After three decades, Erica was finally free. “I sent a wire for about $82,000. I was grateful that I had it to send, and I was grateful to Tate for helping me.”

Erica advises others drowning in student loan debt to stay calm and believe that everything will be okay. “I think that if you have an attorney representing you, companies like Navient take you more seriously,” she says. “They knew I wasn’t kidding around; I’m getting done with this. Everything pretty much happened the way Tate said it would.”

With her student loan debt behind her, Erica can now take advantage of new career opportunities and enjoy peace of mind.

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