Can I sell a body part?
August 24, 2006 5:37 AM   Subscribe

I can't afford to repay my student loans, entirely my fault, what should I do?

Several years ago I took out education loans from Wells Fargo, loans that I have yet to pay on. I essentially disappeared for several years and now the debt collection agency has caught up with me and is attempting to collect. 3 separate loans, totaling about $55,000. They'll settle the accounts if pay half that amount within the next 30 days . I can't afford to pay this. I can't afford to pay the nearly $1,000 in monthly payments to either.

I also have about $30,000 in Federal student loans, which I pay about $200 a month on, which is also getting to be unaffordable, due to mortgage, car and child payments. Plus I got a notice saying the interest rates were supposed to go, which means more trouble.

My wife an I only make about $50,00 a year, bring home about $2000 total a month after taxes.

Yes, this mess is completely my making and yes I've been remiss in taking care of it. I accept that and realize that much of the rest of my life might be spent paying this off. I'm looking for practical advice on how I can straighten out this, please.

I'm not good with money and all of this is extremely overwhelming to the point I don't know what to do.

Is there someway I can consolidate these loans, either as a whole or partial?

Am I in danger of bankruptcy? The house and car are not in my name, they are in my wife's name, could we lose them? What would bankruptcy mean?
posted by anonpeon to Work & Money (28 answers total) 4 users marked this as a favorite
 
disclaimer: I am not a lawyer. This is not legal advice. I could be entirely wrong.

Keep in mind that the $30,000 in federal student loans cannot be erased by bankruptcy.

I would think that they could go after your wife's assets if you live in a state where all your property is considered to belong to both of you. If you live in Florida, they can't take your house.
posted by oaf at 6:08 AM on August 24, 2006


I don't know about the bank loans, but I think the federal student loans can be deferred indefinitely. You fill out a form and say how much you can pay each month and that sets the monthly payments for up to a year. It's a deferrment that's not need-based, so you don't need to justify it.
posted by kdern at 6:26 AM on August 24, 2006


You should have declared bankruptcy last year. Now it's too late. The Republican bankruptcy bill means you can't get rid of student loan debt in bankruptcy. (on preview: you can't get rid of ANY of it in bankruptcy, under the new law)

At this point, all you can do is negotiate. You have substantial bargaining power in this negotiation. You have something they want - money - and they have nothing that you want. Get the total amount knocked down. Get the payments knocked down. At this point your creditors understand that they have taken a risk on you, and it hasn't paid off - they are not going to get all their money. They're trying gambits like "pay half in 30 days", trying to get half of the money. You can negotiate them down further - they'll take what they can get. You have nothing to lose by telling them "no".

Talk to the loan holders. Tell them you have no money. Negotiate a very small monthly payment on these loans, one you feel certain you can meet. (Talk to both sets of lenders, the $55K and the $30K, and negotiate both payments down!) Do not be bullied into a larger monthly payment than you can reasonably afford. Negotiate a payment plan where you pay X for the next Y years and then the loan is forgiven. Whatever deal you can reach.

All of this requires that SOMEONE in your family understand money. Understand budgeting, interest, time value of money, and so on. If neither you nor your wife qualify, you have to find someone who does to negotiate for you.

You can also find a real consumer credit counselor to help you. Typically they are non-profit, often in low-income areas, they do not charge, and they do not contact you first - you go to them.
posted by jellicle at 6:29 AM on August 24, 2006


Well, if there's absolutely no way you can afford to live, then yes, you are in danger of bankruptcy (if you aren't there in spirit already).

Really, really, really double check your money to see how cheap you can live and see how much you could have left over after basic living expenses, and expenses REQUIRED for work (ex: Do you have a sales job where you have to drive from location to location, or do you have a job where you work in the same building each day serviced by public transit?)

Once you get down to the nitty gritty bare minimum, call up these places (especially for the Federal student loans), tell them what needs paying and how much you can afford. Let them know it's the end of the line: Accept it or bankruptcy. It might not work *as* well on the Federal loans, but they'd be surprised what a useless payment schedule they might get from a bankruptcy judgement.

If you find you really don't have any money left to pay your debts and/or the collection companies aren't happy with this, you could try a debt consolidation company. They're more likely to be able to convince the debt collectors of your financial situation, since you'll have handed all your books to them, and they're an uninterested third party. Don't let them squeeze you into something you can't afford though.

After that, well, a judge will be happy to tell these companies what they will and won't get, and will be happy to set up a payment plan for those Federal loans for you in bankruptcy court.

My wife an I only make about $50,00 a year, bring home about $2000 total a month after taxes.

Are you sure about that? Unless US taxes are over 50% that can't be right. Look harder at your finances. You should have an income more like $3,000 monthly.

Now, that doesn't help since at least $1,500 of that will be expenses no matter how cheap you live (unless you decide to live single room occupancy, LOL). That leaves an absolute maximum of $18,000 you can use to pay loans off each year. You have $85,000 in loans. Legitimate payment will take at least 5 years. Consider that bankruptcy will be on your record for only 7 years. Also consider if you can make more money / take on other work.

And yes, if you are married, unless you signed a prenup that is binding (HA!) all her stuff will be used to pay off the debt, especially if you go bankrupt. So I wouldn't consider bankruptcy the best option if you don't want to do that.
posted by shepd at 6:31 AM on August 24, 2006


Also not a lawyer, though I once worked at a dot com in a building that housed the city bankruptcy court (convenient!). Um, that still doesn't make me all that qualified so proceed with caution.

Try to find a respectable credit counseling agency. They do exist from what I understand and they can walk you through some of your options and tell you what can be consolidated, if anything.

Here's a few links in regards to credit counseling:
FTC - http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm
Money/CNN article: http://money.cnn.com/2002/06/17/pf/banking/q_debtconsolidation/
National Foundation for Credit Counseling: http://www.nfcc.org/

I'd also suggest that you or your wife take on a second job or find some other ways to make up the extra $1,000 a month. If you both work a part-time job paying $10 for 20 hours a week you should be able to swing it. Not ideal (especially since you mentioned child payments but I don't know if that means the kids are living with you), but worth looking into. Also, could you sell your house and get a smaller place? You'd have some additional cash that you can use to pay off the loans, and perhaps your mortgage would be lower as well.

(on preview, shepd is totally right about those taxes and take home pay, where is your money going?)
posted by ml98tu at 6:37 AM on August 24, 2006


Thanks for answers so far. I'm not trying to declare bankruptcy per se, can someone give me advice about consolidating also? Can I consolidate my fed loans for lower rates and/or monthy payments?

Is that even an option with the no fed loans ( i doubt it, due to years of none payment)

It should also be added that I'll probably have a large medical bill soon.
posted by anonpeon at 6:37 AM on August 24, 2006


(I'm not a lawyer, this is not legal advice): Have you tried calling them up to explain your situation? From everything I've heard, if the person is willing to repay the loans in good faith, the banks will tailor a payment schedule to fit that (the longer you repay it, the more they make in the end anyway).

Step one is to get a financial advisor (H&R Block or whatever), and they'll lead you through the loan consolidation process and refinancing -- and probably make you look a little more serious about putting things right with your debtors.

Of course, there's always the possibility that things are already too far gone and court will be unavoidable. That financial advisor would be able to let you know where you stand.
posted by cowbellemoo at 6:41 AM on August 24, 2006


You can definitely consolidate your federal loans, assuming you haven't done so already. I did. It cut my payments in half, though I'll be writing checks for many more years as a result.

You can often reduce your monthly payments based on financial hardship as well.

To do either, contact your lender -- the company you send payments to.

As to whether you can consolidate the non-federal loans, a lot depends on who actually owns these loans right now. Is it Wells Fargo that's calling you demanding payment? Or did they sell the right to collect the loans to a third-party agency. I'd think you'd be more likely to be able to consolidate through Wells Fargo, but I'm not totally sure. It won't hurt to ask.
posted by croutonsupafreak at 6:42 AM on August 24, 2006


Federal Student Loans are usually the lowest-interest loans possible (2.x% until recently, I think), consolidating them will probably drive the rate up -- but have a less punative monthly payment. You might be able to save money in the long run if you consolidate around the federal loans (MaxPayable - FederalPayments = TargetConsolidatedPayments).

Good luck.
posted by cowbellemoo at 6:47 AM on August 24, 2006


I read this story because of the headline, which I now realize was joking, but I have a related comment nonetheless. You can't sell a body part, but you can, fairly easily and relatively painlessly, participate in clinical trials as a supplementary source of income. There was a clinic where I am that was offering $2000 for a three month trial of some vaccine, and several research centers offer a couple hundred for various kinds of biological samples such as skin biopsies and marrow aspirates. That way you not only get a little extra money, but you know it's going to help research.
posted by Mr. Gunn at 7:00 AM on August 24, 2006


Ok, for consolidating Fed Loans is there a particular agency I should try, such as Sallie Mae? or would a private company be better.

Yes, second job for will have to happen, probably building websites.

We have a 10 year old child who lives with us, so that's what I meant by child payments :), so no second job of the wife.

and yes, our take home pay is $3,000, my bad.

So my first steps are to consolidate the fed loans, get a second job while talking to a financial adviser, and then work out something with collection agency who is attempting to collect on the loans.

Does this sound like a good step by step process?

Also, I never finished my college education (yes, this was stupid, I KNOW), due to the mounting expense. There are four classes left. Is it a totally insane idea to attempt to go back to school to at least get the damn BA, even if it means throwing on a bit more debt?
posted by anonpeon at 7:22 AM on August 24, 2006




It's not insane, since you'll probably be able to increase your income with the BA, but I'd guess you probably won't be able to get more loans.

If it's been a while, a lot of your credits may not count anymore, so you could be looking at more than four classes (particularly if you'd be going to a different school than you went to previously, since stuff may not transfer either).

There may be some scholarship opportunities, otherwise I would just save up. You may qualify for some grants though, which I don't think you have to repay. I'd guess that debt is probably not an option given your non-payment history, but I am not a financial aid counselor.

Keep in mind you may be paying for college for your ten-year-old in just eight years. Seeing as you're going to not be saving a lot anyway between now and then with all your payments, think about whether:
A- You need the BA to get more money to save up for your child's education, or
B- Your savings is better off going straight to your child's education fund without your getting a degree.

If you don't think the BA will contribute significantly to your salary level, I'd wait until you're on more solid ground.
posted by ml98tu at 7:41 AM on August 24, 2006


I'm not doing clinical trials.
posted by anonpeon at 7:46 AM on August 24, 2006


Look into consolidating through the WilliaM D. Ford program with the US Department of Education. They offer an income-contingent repayment plan, which is an enormous help. I believe that would take your wife's income into account in calculating your payment, though.
posted by dilettante at 8:01 AM on August 24, 2006


Move abroad.
posted by DrtyBlvd at 8:04 AM on August 24, 2006


Move abroad.
posted by DrtyBlvd at 4:04 PM GMT on August 24


Would this work?
posted by dance at 8:15 AM on August 24, 2006


Some federal loans you can consolidate directly with them, not through a third agency. See if you can consolidate the Wells Fargo loans, too.

Consolidating lowers your monthly payment even if your interest is the same as before, because it re-sets the payment period. For instance, if you still have 8 years left on your loans when you consolidate, the consolidation resets to (usually) a 10-year repayment period, so you have longer to pay it off.

Once you've worked out your monthly payments, figure out the best way to make sure they get paid. If you don't want to set up automatic deductions from your checking account, ask these places to send you monthly bills in the mail as a reminder to pay them. Some banks have free email reminders you can set up through their websites where you get a monthly email reminding you to pay the bill.
posted by Sprout the Vulgarian at 8:35 AM on August 24, 2006


No one has mentioned yet that if you explain your situation to the holders of the loan, oftentimes they will work with you to figure out a reasonable payment plan. Although you might've already done that and that's when they told you they want you to pay 50%...
posted by echo0720 at 9:02 AM on August 24, 2006


1) Communicate with your creditors. They don't want you to default/die. They want their money. Help them help you help them get it.

2) Consolidate. You'll pay more in the long run, but for now you'll be able to meet your responsibilities. And you can always pay more than the new minimum without penalty.
posted by notyou at 9:56 AM on August 24, 2006


I think going back to school is indeed a good a possibility. Go for six hours and you can be in deferrment with your loans (most of them; not sure about the WF ones. definitely the federal ones.). Go to a state school because it's the cheapest. If you're paying $200 right now per month, then that should pay for six hours per semester (you don't have to go in summer) and give you a little bit to throw at them for good measure.
posted by jxpx777 at 10:09 AM on August 24, 2006


For federal loans I like and use http://www.loanconsolidation.ed.gov/

If you consolidate your federal loans you lock them in at whatever rate they are at now (better when done sooner if rates expected to rise)

Also, there are some incentives if you use automatic debit of interest rate decreases (I think .25%?)

And it's pretty easy to go into forbearance on these payments and no extra cost. I don't know about non-federal loans consolidated through sallie mae, but to enter forbearance on their non-federal education loans you have to pay like $75 per loan. Jerks.
posted by unsigned at 10:27 AM on August 24, 2006


er ...

"I don't know about federal loans consolidated through sallie mae, but to enter forbearance"
posted by unsigned at 10:28 AM on August 24, 2006


(I Am Not An Anything) Always, always, always consolidate federal loans to federal loans.
posted by Skwirl at 10:38 AM on August 24, 2006


In my experience, there's no need to be afraid of the federal loan people -- they really will try (or at least did in my case) to help you at least get the federal payments down to something manageable.
posted by treepour at 11:08 AM on August 24, 2006


I don't know if this has been mentioned above because I'm too lazy to comb through all the responses. Of the ones I have read, all I have to add is two words:

Extra job.

Here's a few more:

Maybe two extra jobs.
posted by friarjohn at 1:58 PM on August 24, 2006


You really should be able to defer due to financial hardship. It's just a matter of doing some paperwork.
posted by bingo at 3:46 PM on August 24, 2006


Cancel your cable TV, your gym memberships, whatever. Use that money. I got so angry when a friend of mine was crying (literally) about how she had no grocery money to feed her 3 kids that month, yet she still paid her $100 cable tv/internet bill. "That's a household bill!" she said. Ha. You can live without cable/internet. I've never had cable TV and I don't feel deprived.
posted by IndigoRain at 7:18 PM on August 24, 2006


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