Defaulting on a loan

May 10, 2013 7:57 AM

I am paying back student loan debt that I no longer can because I'm back in full-time education and am not making nearly enough ££.

I went to undergrad in the United States. I took out a loan which my university backed me up for, since I couldn't find a cosigner. It was a new initiative for international students, since international students can't take out loans without cosigners, and there was no way for me to take out a loan in my "home country." I graduated 7 years ago, and have been employed on and off, so I deferred when I wasn't working. The jobs that I have worked have been incredibly poorly paid, but I've still been paying it back. I still have about $18,000 to go, and I'm back in full time education, this time in the UK, and can't afford to pay it. (I had been paying it up til now on my (very small) savings which are now depleted.) I have no deferment time left.

I called my loan company and told them I couldn't pay it since I'm back in full-time education. They told me I have no deferment time left (which... I had already told them at the beginning of the phone call, so that annoyed me) and that I had no other options.

So, I really do have no other options. My question is how much will it affect me if I default on this loan? I plan to pay back my debt once I'm working a decent job with a decent wage. I'm considering the:

a) the fact that my university backed me up, and I don't want this program to be cut for other international students in need because of me not paying it, which is why I've been paying despite my abysmal salaries.

b) I am not American and I have no intention to or interest in going back to the US, but I'm wondering if my credit score can affect me elsewhere?

c) Despite not having any intention of going back to the US, what if I get a job and my company sends me there, will this prevent me from getting a visa or give me other complications?

d) I plan to have a pretty political and public career, will not paying this for a few months (however long it takes me to find a decent paying job) severely affect me? Can this come out and ruin my career?

If it matters, I'm 28.

Thanks, AskMe.

posted by anonymous to Work & Money (7 answers total)

If you are a full time student at an accredited school, you should be qualified for In-School Deferment.

From the American Student Assistance:

In-School Deferment

Postponement for when you are enrolled at an accredited school.

If you are a new borrower as of July 1, 1993, you must be enrolled at least half time. Definitions of half-time enrollment vary by school—it’s important to know how your school defines this.

If you are a pre-July 1, 1993 borrower, you may need to be enrolled full time to be eligible for this deferment.

Parent PLUS borrowers have always been able to use this deferment based on their own enrollment in an eligible school. However, borrowers of Parent PLUS loans first disbursed on or after July 1, 2008, can use this deferment based on the enrollment of the student benefitting from the loan. The benefitting student must be enrolled at least half time.

How Long Does It Last?

There is no maximum amount of time for this deferment as long as you meet the criteria.

http://www.asa.org/loan-help/defer/deferment/

Please contact someone at ASA - they should be able to help you.
posted by steinwald at 8:10 AM on May 10, 2013 [1 favorite]

To the best of my knowledge, the limitation on the total number of months a student loan may be deferred only applies to deferments due to unemployment or economic hardship. I don't believe there is any such limitation on deferments due to being in school.
posted by slkinsey at 8:12 AM on May 10, 2013 [1 favorite]

This was a loan from a bank? Did you try to work out a payment plan?

I have no idea about how British credit reports or credit reporting law works, but I have no doubt that they can share default data across borders - not sure if they actually do that, though, but my gut feeling is that a default could come back to haunt you.

As for your political career - again, I don't know about in the UK, but in the US it could definitely hurt you. You would have trouble getting a security clearance or, if you are a lawyer, admitted to the bar. Employers also commonly check credit reports now. As for politics, several DC council members have gotten bad publicity for defaulted debt recently ... But this being in DC government nobody really cared all that much!
posted by yarly at 8:14 AM on May 10, 2013

That stuff about deferments while in school applies to US govt loans. If these are private loans you have no such rights (unless they were in your loan contract). You would have to try to work it out with the lender yourself.
posted by yarly at 8:16 AM on May 10, 2013 [1 favorite]

Have you been in touch with your undergraduate institution? If they'll have to pay it back when you default, they'd probably appreciate being involved in the evaluation of options.
posted by cranberry_nut at 8:23 AM on May 10, 2013 [2 favorites]

(They also might have some leverage to help negotiate a different repayment schedule.)
posted by cranberry_nut at 8:30 AM on May 10, 2013

c) Despite not having any intention of going back to the US, what if I get a job and my company sends me there, will this prevent me from getting a visa or give me other complications?

Do your own research on this, IANAL, etc... But I've heard repeatedly that credit doesn't even transfer between the US and Canada. Both from people online, and off. I have friends with dual citizenship, and I also heard it in relation to getting your first apartment up there if you wanted to move. I've also seen the same answer about the US from the UK, or vice versa, repeatedly.

Unless some student loans are some magic special case, I really really doubt this is true.

I'd be really wary about this creating some weird BS if I ever visited the US though, simply because student loans are this massive excempt from all the rules unstoppable force here.
posted by emptythought at 10:05 AM on May 10, 2013