Private student loan hell.
August 6, 2010 7:10 PM   Subscribe

Is there any way out of this hole? Private student loan hell.

My girlfriend has a private loan on the order of $35,000 that was used to cover a portion of her school expenses. Without getting into the details (I'll elaborate on request), her experience with the bank has been an absolute disaster. She is getting reamed on interest and has been struggling to keep up with her payments. To complicate matters, she's currently in between jobs; she has a full time contract position coming up for a few months, but she's definitely taking a hit in her salary and has no income at the moment.

Her bank is unwilling or unable to work with her to make her loan payments more feasible. She's unable to put the loan on deferment because she's no longer in school and she can't reconsolidate the loan with her other federal student loans because it's private.

Every bank and credit union that she has inquired with thus far has either said they have no options available to them or those that do are loans with 60 month terms... meaning a lower interest rate now but a higher monthly payment.

Help?
posted by Raze2k to Work & Money (17 answers total) 6 users marked this as a favorite
 
Is this a variable interest rate, or fixed?

Does the bank offer reduced interest rates for going paperless? How about on-time payments?

You also haven't really discussed her other debts. Does she have a car payment? If so, she should get rid of the car. What about the possibility of moving to a cheaper place to live/moving back home until she has a job.

Will she be able to afford the payments when she starts her new job?
posted by TheBones at 7:18 PM on August 6, 2010


What about looking into signing up for some credits at a community college. That would at least put her back into student status and buy her some time, perhaps. Or does she have to be full time to be on deferment?
posted by Theloupgarou at 7:19 PM on August 6, 2010


If this is a federally insured student loan, than she may be eligible for a deferment or an income dependent repayment schedule. Those may or may not stop the interest from accruing, but probably won't, but it will at least make the current demands easier. And like Theloupgarou said, taking classes would make her eligible for a deferment even if her job status doesn't.

If it isn't a federal loan, then she might consider bankruptcy.
posted by Some1 at 7:31 PM on August 6, 2010


@TheBones:

It's fixed.

They offer a 0.25% reduction for automatic online payments, which is helpful but doesn't solve her problem completely. The interest is horrendous and well more than that reduction can resolve. The big thing here is that she's desperately trying to avoid a hit to her credit rating and at this rate she will be unable to make payments in completion each month reliably.

She has a car payment, but the car is required for her to get to her job. We live in the suburbs and her job is a 40 minute drive away. She also has a side job that inhibits her ability to take public transportation. The side job is not a significant source of income, but it does help pay the bills. As for rent, we live together and since the beginning of the summer I've been paying for our living expenses.

She should be able to afford the payments when she starts the job, but it's going to be very tight and it's a temporary position. Her goal is to lower the payments sufficiently such that she can save enough money over the course of the position and continue making payments if the contract is over and she's still looking for a new position.

@Theloupgarou:

She needs to be at least part-time (2 classes?) to qualify for deferment and that isn't something that she can afford, even at a community college.
posted by Raze2k at 7:36 PM on August 6, 2010


@Some1:

It's not a federally insured student loan. I don't believe she's ready to consider bankruptcy based off of one loan when she's confident that she can afford the rest of her bills.

Thank you all thus far for your suggestions.
posted by Raze2k at 7:37 PM on August 6, 2010


I know you said she doesn't want a hit on her credit rating (why not? she has a car and it doesn't sound like a house is in her future), but I bet the bank will get a lot more reasonable if she stops paying them for awhile.

When you owe the bank $1000, that's your problem. When you owe the bank $35,000, that's their problem. Fuck 'em. They can't repossess her brain, doesn't sound like she has much by way of wages to garnish.

It doesn't matter if it's one loan or twelve, if she can't pay what she owes she's bankrupt.

Consult an attorney before following my spiteful, probably ill-conceived advice. Consult an attorney anyway, actually.
posted by zjacreman at 7:43 PM on August 6, 2010 [2 favorites]


Don't mess with missing payments, zjacreman was kidding... right?

One last thing about the car and then I will never bring it up again- can she sell it and outright buy a used car? She would at least get rid of that payment.

Does she have a roth IRA by any chance? I think you can take out principle on a roth as long as you pay it back before the end of the tax year.

Also, have you thought about doing a partial balance transfer to a credit card with a 12 month 0% interest rate? It'll skyrocket after the 12 months, so you'd have to be careful.

Have you guys considered getting rid of cell phones/downgrading to cheaper plans/getting rid of cable?
posted by TheBones at 7:53 PM on August 6, 2010 [1 favorite]


There is a difference between deferment and forbearance.

She may qualify for a lender option forbearance, even if she doesn't qualify for a deferment.

She may also be able to place some loans in forbearance and pay off others --- I assume the $35k is several smaller loans adding up to that much through the same lender rather than one individual $35k loan.

Plus, her lender sounds like mine. If you wish to MeMail me the company name, I can explain what I did to get a badly needed six month forbearance.
posted by zizzle at 7:55 PM on August 6, 2010


TheBones, a lot of student loan companies won't allow the transfer of balances or even for payments to be made by credit card. This is a fairly recent change, but has been so since I graduated from college 6 years ago.
posted by zizzle at 7:58 PM on August 6, 2010


@zizzle: It's actually one of several student loans with the same bank. That's to say, she has several smaller federal student loans that she could reconsolidate elsewhere, but the problematic one is a single $35k private loan (that was a consolidation of a bunch of smaller private loans).
posted by Raze2k at 7:59 PM on August 6, 2010


You know what, I'm not kidding. If the situation were reversed - if a bank or corporation owed you a bunch of money that they didn't really have - you'd have to sue them to get it. Banks aren't people, they don't have feelings, and you have to take care of yourself first.

She signed a contract, which presumably has spelled-out terms for modification and consequences for non-payment, and her obligations do not extend beyond what's written in the contract. She's tried to be reasonable, and they won't play ball. Attorney!

If she can't make her student loan payment, feed herself, and pay her rent all at the same time, she's bankrupt, and it's attorney time.
posted by zjacreman at 8:04 PM on August 6, 2010


Right.

So what she should do is ask 1) ask about a forbearance, not a deferment. A forbearance is different and may only last 6 months before she has to reapply for it. 2) She should be prepared that the first person she speaks to will likely tell her no or not necessarily have the information. If she doesn't get anywhere, she should ask to speak to a supervisor, who may have to call her back the next day. She absolutely should get the name and if possible, ID number, of the first person she spoke to in the event the supervisor doesn't call her back within 24 hours. 3) The supervisor should be more willing to help her out. She should have her facts all ready. She should emphasize that she WANTS to pay her student loans. She should say she HATES having debt and WANTS to give them her money. She really does. Then she should say she just doesn't have it. Even if she can't pay the full amount of the loan, she should figure out if she can pay any of it. Any of it all. Then she should say, "Look, I can actually pay you $100/month. I wish I could do more, but I can't right now. Here's why." This is followed by a well calculated rundown of her monthly expenses.

The point is, she should come with a way she can pay at least some of the loan. She needs to show she's willing to work with them, but she needs them to work with her, too. There should also be an application for a forbearance on the company's website. She should fill it out, include her paystubs, and then include her own personal rundown of the difficulties she's having in making the payments.

But again, she wants to look into FORBEARANCE and not deferment. And again, too, she REALLY needs to come up with some percentage of the payment she can make each month.

Also, as an FYI, if she has a cosigner on the loan and she misses a payment, the cosigner will hear about it and then become responsible for the loan. If there is a risk that she may not be able to make payments while they are still active, she needs to inform her cosigner.
posted by zizzle at 8:10 PM on August 6, 2010 [1 favorite]


Just as an FYI, student loans are exempt from bankruptcy filing.

They are nearly impossible to discharge. Consulting an attorney likely wouldn't be useful at this juncture and filing for bankruptcy on her own would do nothing to remove the student loan debt.
posted by zizzle at 8:14 PM on August 6, 2010


"She needs to be at least part-time (2 classes?) to qualify for deferment and that isn't something that she can afford, even at a community college."

Following a strategy I've outlined previously, she could get a new federal student loan to pay for both the credits and add extra money to her budget to help her pay off the private loan faster.
posted by Jacqueline at 9:38 PM on August 6, 2010 [1 favorite]


She needs to talk to a financial advisor, debt advisor, accountant, CPA or something like that. Maybe even a bankruptcy lawyer. Those people will know the options that she has. The bank isn't interested in helping her, but those people will be.
posted by twblalock at 1:11 AM on August 7, 2010


Check the National Consumer Law Center's website for student loan info. They have information about forebearances and contact information for ombudsmen at the DOE and a ton of individual companies. Sorry for no direct links, I'm on a phone.

http://www.studentloanborrowerassistance.
posted by Mavri at 5:24 AM on August 7, 2010


She's unable to put the loan on deferment because she's no longer in school and she can't reconsolidate the loan with her other federal student loans because it's private.

What about an unemployment deferment? I deferred mine for several years while I was a contractor. The law at the time was that you had to work an average of less than 25 hours a week. Her upcoming fulltime contract gig would be offset by her current downtime, meaning she might still average less than 25 hours a week overall and qualify.

I obtained these deferments in the late 90's and I was working with a super-friendly bank, so YMMV.
posted by january at 1:03 PM on August 7, 2010


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