Private Student Loan in Collection - pay off at once?

I have about $15,000 in private student loans in collection (totally unreal issue with how they got there - apparently, I moved twice in one year and the lender claims they couldn't find me, so they sent my account to collection). I also have Federal Loans that are on excellent repayment status (they recently reduced my interest rate because of stellar payment).

Now, my wife and I combined bring in over $7,500 net a month. We also have about $35,000 in our checking account and almost $10,000 in savings. On the flip side, we are expecting a child in the next few months and she will be quitting her job to be a full time mom (for now). So we need to be sensible in how we save and budget our income.

What is the best course of action? Pay off the ENTIRE student loan in collection within the next six months/year? OR negotiate with collection agency to reduce the amount to pay and then set up a payment plan over the next few years? I worry about my credit rating but I also worry about having enough cash flow to cover unique expenses once the baby is born.

What are your thoughts?

Negotiations for accounts in credit are usually more successful if you offer to pay the debt at once. Since you have the money, I'd do that -- negotiate down, then pay if off.

But then you will have to build up your emergency fund again.

Also, since you're about to have a life-changing experience (both with regards to the baby AND your wife quitting work) be sure to review your financial status (retirement, life insurance, etc) with your financial advisor.

You can negotiate down private loans if you neglect to pay them? Do I have a chance to stop paying my 40k in private loan purposefully to get it sent to collections, all so I can ask to get the amount reduced? If this is actually an option then why don't more people do it?

The last thing you want to do is move to debt recoveries to secure yourself a lower rate of payment, esentailly all your doing here is moving you debt to an agency who will instantly black list your name and add extra interest to the loan... you may also be stung with extra fees to pay your way out of the agreement... this will negatively affect your credit rating! making multiple payments on time every time gets you a good credit rating!

depending on the interest... if your in a position to pay it off whole then do... if you want a better credit rating and are prepared to pay monthly. go down that route!

simply ring your creditor (the people who originated you the loan) and explain to them that your are not in a position to pay the amount you signed up for and arrange a payment plan with them directly... if they are aware they may not get their money bk as quick as was stated they will arrange with you options for you to either reduce your monthly payments and extend the loans life...

dont be silly and wait for it to get passed to creditors... ive never read anything so rediculas! :rolleyes:

You will certainly be able to negotiate with the collection agency to pay off your private student loans. The key for you will be for you to not tip your hand and let them know that you are able to pay off the entire amount at once but to make it appear that you are really going to be stretching to pay off an amount that is 60% to 80% of the loan balance. And to address another poster the reason that this is not a good option and the reason why more people will not do it is because anytime a loan is sent to collection (student or otherwise) it will have a negative effect on your credit score.