Can Debt Relief Help With Student Loans?

If you’re overwhelmed by private student loan payments and wondering whether debt relief can help, the short answer is yes, but only in certain situations. Debt relief companies like National Debt Relief and Freedom Debt Relief may be able to reduce what you owe on private student loans through a process called debt settlement.

That said, debt relief programs are typically designed for unsecured debt and don’t work for federal student loans, which come with their own repayment and forgiveness options. If your student loans are federal, we recommend reading our guide to federal student loan forgiveness programs.

In this guide, we’ll explain when debt relief companies can help with private student loans, which companies to consider, and what risks to watch out for.

Table of Contents

1. Do debt relief companies work with student loan debt?
2. When debt relief works for private student loans
3. National Debt Relief and Freedom Debt Relief: What to know
4. Risks of using debt relief for student loans
5. What to do if you have federal student loans
6. FAQ

Do debt relief companies work with student loan debt?

Yes, but only for private student loans. Debt relief companies don’t work with federal loans because federal programs are managed by the U.S. Department of Education and have specific rules about repayment and forgiveness.

If your student loans are private and you’re behind on payments, debt relief companies may be able to negotiate a lower lump-sum payoff amount with your lender. This is called debt settlement. You stop making payments to your lender and instead deposit money into an account controlled by the debt relief company. Once there’s enough saved, they try to settle your loan for less than what you owe.

When debt relief works for private student loans

Debt relief is usually a last resort for private student loans that are in default or significantly delinquent. If you’re still current on payments, your lender likely won’t be open to settling.

In general, debt relief could be a fit if:

• Your private student loans are already in default
• You’ve exhausted all deferment or forbearance options
• You’re unable to refinance due to low income or bad credit
• You’re prepared to deal with the credit score consequences

If you have federal loans, do not stop paying to try and settle—this strategy won’t work and can make your situation worse.

National Debt Relief and Freedom Debt Relief: What to know

Both National Debt Relief and Freedom Debt Relief work with private student loan borrowers, but neither can help with federal loans.

• National Debt Relief accepts private student loans in its debt settlement program. It won’t work with federal loans and typically requires loans to be in default.
• Freedom Debt Relief may take private student loans on a case-by-case basis. Its focus is on unsecured debt like credit cards, but it may include private loans depending on your situation.

Before enrolling, you should always ask upfront whether your specific loans qualify. Also, confirm the fees involved: Most companies charge around 15% to 25% of your settled debt amount.

Risks of using debt relief for student loans

Debt relief might sound like a quick fix, but it comes with serious downsides:

• Your credit score will drop. Stopping payments and settling for less damages your credit in the short term.
• Your lender can sue you. During the settlement process, your loan servicer may pursue legal action if it’s not being paid.
• Not all lenders will settle. Some private lenders refuse to negotiate, no matter how far behind you are.
• You may owe taxes. Any amount forgiven could be considered taxable income, though student loan debt settled between 2021 and 2025 may qualify for an exclusion.

Debt relief and debt forgiveness both drop your credit score immediately. You can rebuild your credit score over time by using and repaying credit wisely. In addition, the amount of the debt relieved or forgiven could be included in your taxable income; there are exclusions for student debt relieved after December 31, 2020, and before January 1, 2026.

Erin Kinkade, CFP®

What to do if you have federal student loans

If your loans are federal, debt relief companies can’t help you, but you do have options.

You may qualify for:

• Income-driven repayment (IDR) plans that cap payments based on your income
• Deferment or forbearance during times of hardship
• Forgiveness programs like Public Service Loan Forgiveness (PSLF)

FAQ

Does National Debt Relief help with student loans?

Yes, but only with private student loans. National Debt Relief won’t work with federal loans, but it may help you settle private loans in default.

Does Freedom Debt Relief help with student loans?

Freedom Debt Relief may take private student loans on a case-by-case basis. It doesn’t assist with federal loans.

Can you settle student loan debt for less than you owe?

Possibly, but only with private loans. Settlement usually requires loans to be in default, and not all lenders agree to negotiate.

Should I use a debt relief company for student loans?

Only if your private loans are in default and you’ve exhausted all other options. Be prepared for a hit to your credit and potential tax consequences.