Financial counselors or companies should never advise someone to default. This is a decision that must be made by the borrowers themselves. Most borrowers intentionally stop making payments in order for the account to default. The decision to default should directly come from the borrower after considering the pros and cons.
When there appears to be no decrease on the loan after paying huge monthly sums over a long period of time, defaulting on a loan becomes an appealing option even if that borrower hasn't missed a single payment up to that point in time. In a perfect world, this option should only be considered by those who are frequently late on their payments. But as a consequence of the limited payment options and incredibly high interest rates, strategic default is an option that is being considered by more and more students, regardless of their track record or ability to pay on time.
Your Credit Score
One of the most serious concerns for defaulting on your loan is damage to your credit score. This is a serious consideration given that it can take up to 2 years after you've settled to rebuild your score. Because of this, it's best to ensure you decide on other loans such as mortgages before you decide to embark on a strategic default.
What Savings Can Be Made Through Settlement?
Despite the credit damage, you have to weight up the pros and cons. Yes you will suffer from a low credit score for 2 years, but a strategic settlement can save you a lot of money. In fact its more common today for private student loan lenders to write off millions of dollars each year. They actually expect this to happen. This means it opens up the way for negotiating settlements with your private lender.
To avoid the possibility of litigation, you shouldn't have a long period of time of avoiding your payments. Instead, if you're struggling to make payment, don't put things off any longer. It's best to start the settlement process as soon as you can. The longer the period of time where you've avoided meeting your monthly payment requirements, the less chance you have of successfully negotiating a strategic default.
If you get the ball rolling sooner, you can expect a settlement of anywhere between 40% to 50% settlement.
Private Lenders Playing Hard Ball
In theory it might sound simple, but the reality is that many lenders (particularly Navient) will make it as difficult as possible for you. They will take advantage of someone who isn't fully aware of the process and leverage their lack of understanding to their benefit. There are many pitfalls and frequent mistakes a borrower will make when entering the negotiations. This is why it's highly recommended to have a skilled negotiator like Andrew Weber on your side.