How to Get Out of Debt With the Get Out of Debt Guy » student-loan

I’m Living Paycheck to Paycheck After a Divorce and Can’t Make a Dent in My Student Loans or Credit Card Debt. – Tonya

Steve Rhode — Sat, 28 May 2011 15:07:49 +0000

I have just over $20,000 in student loans, $8000 car loan, $700 credit card, I’m working on paying off a charged off credit card of about $3500, and I have a hospital bill of around $1400. I currently make $23712/yr. I’m making minimum or Income Based payments on All of them and now my IBR for my student loan has gone up by $20/month due to a raise. Due to the charged off credit cards and some hard times after a divorce, my credit score is around 600.

I can’t seem to make ends meet. I zero out my bank account or more every paycheck. I don’t feel like I spend frivolously and not only am I not making a dent in my student loan or credit card, I’m not able to save any money for retirement, household projects or even a vacation! I’m also putting off refilling my prescriptions month after month. On paper I make too much to receive assistance. Can you make any suggestions of how to conquer this?

Erica

I’m currently backed-up on answering questions so I’m posting some of the questions here for you to help answer.

This is your chance to be a hero and help out this person by providing your feedback and answer to the question in the comments section below.

@GetOutOfDebtGuy

How Can I Bring My Student Loans Current in a Reasonable Amount of Time? – James

Steve Rhode — Fri, 27 May 2011 19:39:46 +0000

From How to Get Out of Debt

“Dear Steve,

In a nutshell: 33,000 in student loan debt, not great credit, debt to income ratio to high, to many accounts with high interest, can’t refinance house, wouldn’t make any money selling the house.

I’m having trouble making monthly payment and my student loans are on forbarence are coming due. I don’t have emergency funds left in my savings account.

How can I bring my student loans to a reasonable amount, find some kind of consolidation loan to a lower payments, lower interest rates on credit cards without doing much harm to my credit?

Maybe its impossible.

Took the took the test on the IBR page for student loans and it said I would”probably qualify.”

James”

I’m currently backed-up on answering questions so I’m posting some of the questions here for you to help answer.

This is your chance to be a hero and help out this person by providing your feedback and answer to the question in the comments section below.

@GetOutOfDebtGuy

I Have to Do My College Degree All Over Again But I Have Old Student Loans. – John

Damon Day — Sat, 14 May 2011 15:23:01 +0000

From How to Get Out of Debt

“Dear Damon,

I’ll try to make this as informative as possible.

I was a senior at my last college, and I took a 30k starter loan. I really thought I would be graduating months later. However, that was not the case, and I had to start over at a new school.

This new school has required me to pretty much recomplete my degree, which has required me, in turn, to be in school for 3 and a half more years so far. I am nearly finished with school, and should be done by September at the latest.

I have been attempting to pay off this loan for 2 and 1/2 years @ over $500/month. For a student currently in college, such is pretty much impossible while taking into account other college/housing bills.

I stopped paying the loan in November 10′. I have not answered many of the phone calls recently, because I don’t know what to do. Apparantly, my sister in law got a debt collecting call yesterday. I dont know how they got that information, but this has to stop.

I believe I have payed off about $11000 of the total loan amount. i also own ~9k to family members (they are lenient on the pay back time frame) as well as about $25k to school loans that I have taken to get through my new school and ~1k on a credit card bill. In my estimate, I am about 50-60k in debt.

I dont know what to do, or how to approach the situation. If I can be out of school and working by September, I will be ok. At my post-college job, I will make nearly 100k/year. If I can get to that point, I will be fine.

However, the phone calls to family has to stop. I am going to call the creditors and explain my situation to them, and see if we can work something out. I have zero money to give them at the moment though.

How would you approach the debt collectors and paying off the debt, given my circumstances?

Any advice is greatly appreciated.

John”

The Answer:

Hello John,

The best advice I can give you is to contact the loan that is trying to collect from you, explain that you are still in school and you cannot afford it but should be graduating this year and will have the ability to pay them back starting toward the end of the year. The other loans you should be able to keep in forbearance for another year or a little more if needed after you graduate.

So the best place is to open the line of communication and see what they can offer. Usually they are willing to work with you, especially if you are still in school.

Please update me in the comments below once you find out what they say.

Damon is a talented independent debt coach that provides in-depth assistance and consultations for people struggling with debt. If you want a personal debt coach to help you through a difficult situation or want assistance to find secret discounts offered by debt settlement companies I think Damon Day is an excellent person to contact for advice and assistance. He can be reached directly at DamonDay.com

If you have a debt related question you’d like to ask, just use the online form.

College Grads 2011, Bad News, You Are The Most Indebted Ever With Student Loans

Steve Rhode — Thu, 12 May 2011 22:00:38 +0000

From How to Get Out of Debt

Thanks to an awesome reader and tipster I was told about the recent Wall Street Journal article which shows the graduating class of 2011 is the most buried under student loan debt, ever.

Even as the average U.S. household pares down its debts, the new degree-holders who represent the country’s best hope for future prosperity are headed in the opposite direction. With tuition rising at an annual rate of about 5% and cash-strapped parents less able to help, the mean student-debt burden at graduation will reach nearly $18,000 this year, estimates Mark Kantrowitz, publisher of student-aid websites Fastweb.com and FinAid.org. Together with loans parents take on to finance their children’s college educations — loans that the students often pay themselves – the estimate comes to about $22,900. That’s 8% more than last year and, in inflation-adjusted terms, 47% more than a decade ago.

Still, the growth in student debt marks a shift toward a form of obligation that can be a lot more onerous than credit cards or home loans. Student debt can carry interest rates as high as those on subprime mortgages, and it’s much harder to shed in the event of trouble. There’s no house to give back to the bank, and even bankruptcy rarely offers relief.

Read the rest of the article, click here.

@GetOutOfDebtGuy

I Just Got a Notice That My SSI Payments Are Going to Be Garnished for an Old Student Loan. – Alexandria

Steve Rhode — Fri, 29 Apr 2011 15:39:06 +0000

From How to Get Out of Debt

“Dear Jeremy,

I withdrew from my doc studies three months before graduating becuase my spouse became terminnaly ill in 1997. He passed away Dec 20, 2010.

From 1997-2011 I became his full time caretaker. I could not work. The student loan people hired various agencies that proceeded to abuse us every day 7 days a week calling family, neighbors, friends, old employers using criminal tactics to collect a debt that I just could not pay back. I sued several of the collection agencies and the judge ruled in our favor.

Now, I only recieve a small widows allotment and my very small SSI payment that cumes at 944.00 per month. It pays my mortage.

In yesterdays mail I recieved a letter stating that they will garnish my SSI payment, therefore I will cannot pay my mortage. I will lose my home.

What may I do to defend myself.

Thank you.

Alexandria”

P.S. Here is the letter I sent to my Congressman.

I am hoping that you may be able to help me with a terrible situation concerning the FLDOE. They have hired yet another collection agency even more aggressive than the other companies that have tormented our home since 1997.

My spouse became progressively ill and remains permanently disabled. I had to withdraw from doctoral studies three months before graduation in 1997 and have remained a fulltime caretaker. My spouse is now in the end stage renal failure with multiple medical complications.

The FLDOE has now hired a company by the name of FMS they continue to call our home and they have contacted our elder son through his job.

Please help to stop this abusive behavior.

When I attended the college and universities it was with the intention that upon graduation I would have found gainful employment to support our home. However, when things happen beyond your ability to control your circumstances then there is nothing that one may do out side of suicide and even then one must have insurance.

These agencies hired by the FLDOE have literally tortured our family with the intent to harm by making false and abusive statements to our family, their extended families, our neighbors and our old employers, they have contacted my college and universities and notwithstanding have verbalized abusive and filthy language from various states and even Canada at all hours of the day and night since 1997. They have not respected our cease and desist letters and were sued in 2007 for making false and abusive statements on the phone and in letter form.

Now, my spouse is terminal, he will be again hospitalized this coming Monday for vascular surgery and several tests that will have biopsies. I need some peace.

My intent was to provide well for my family and it did not turn out that way. We cannot pay these people back, they refuse to accept the bankruptcy in 1997.

Please call then and have them stop. 630-613-1151 FMS.

The Answer:

Dear Alexandria,

Pursuant to 42 USC, Sec. 407(a) in most situations your Social Security payments are exempt from garnishment. Thus, if it is a third party debt collector who is threatening to garnish your social security payments they may be violating the FDCPA.

However, the federal government can withhold payments of social security to repay a debt owed to it. There are limits to how much it can withhold. In either situation you should contact an attorney in your state to have them analyze your situation to see if you are protected or have the ability to pursue your own claims.

Jeremy Golden, Esq. is one of the resident debt experts here at GetOutOfDebt.org that helps people for free. Jeremy is a consumer rights attorney licensed to practice in California. He represents individuals in cases against debt collectors for violations of the FDCPA. He also focuses on defending people in collection cases who have been sued by their creditors or debt- buyers. In the last five years he has won at trial or obtained a dismissal in over 200 collection cases. Recently he was voted one of San Diego’s Top Attorneys in the field of Consumer Law by SDMetro Magazine. His website is goldencardona.com

Legal Disclaimer: This is for educational purposes only. It is not to be relied upon as legal advice. It also does not create an attorney-client relationship. No such relationship is formed with attorney without a written agreement.

If you have a debt collector question you’d like to ask just use the online form.

We Are Trying to Get Out of American Educational Services Student Loans

Steve Rhode — Thu, 21 Apr 2011 23:09:10 +0000

From How to Get Out of Debt

“Dear Steve,

My wife returned to school several years ago and took out some student loans. Those loans were eventually sold to aes. One was for about $10,000 and the other for about $8,000. She has been paying the minimum statement for five years, (about $9,000) but the amount owed hasn’t decreased! The payments are for about $150 a month and the interest rate on each loan is 4.75%.

Apparently the interest in accruing daily. What is the best way to for us to pay off this debt!

Todd”

The Answer:

Dear Todd,

The problem is that on a total loan balance of $18,000 the annual interest charged would be about $900. Since you are paying $150 a month you are making little overall progress since the majority of your payment is going to interest only.

I believe your student loans are private student loans which have limited modification options. If these are somehow government back student loans then I’d suggest you contact the Department of Education and ask for information on the Income Based Repayment Program (IBR).

The 4.75% interest rate is pretty darn good so if you want to dig out from under these loans faster you’d need to increase your payment and all of the additional would go towards paying down the balance owed.

If you wanted these loans to be repaid in about five years you’d need to pay about $340 a month. If you can afford that it’s probably the best solution for getting rid of the loans once and for all.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

My Student Loan Story From Hell. – Jody

Jeremy Golden — Fri, 15 Apr 2011 23:26:05 +0000

From How to Get Out of Debt

“Dear Jeremy,

My student loan story of hell.

Between 1985 and 1989, I took out student loans to the total of approximately $14,000. Being a single mother, thought education would get me a better job than a factory job. So I got my education and could not find a job that would pay me enough to pay rent, electricity, gas, cable (could not afford to go to the movies, or other entertainment), food, gas for my car and up keep on the car, and daycare (which at times I was responsible for all or part of it).

In 1998, I filed bankruptcy and included my student loans (but because of bad legal advise, no hardship paperwork was included in the bankruptcy) which at that time amounted to approximately $23,000. The garnishment for the student loans started in December 1999, approximately a year and half after my bankruptcy had been finalized.

As of today, approximately $26,000 via my garnishment and this does not include the amount that had been paid before the filing of my bankruptcy, one tax return taken, and the garnishment, and according to the NSLP, I am in default and I still owe approximately $39,000 and none of which has gone to the principal of the original loan.

I am also wondering why if in fact if I was in default on my student loans, why is my credit so good, In the last six years I have been able to secure several loans one for a home and just recently for a car and have received several credit cards.

When I contacted NSLP that the only remedy was to redo the remainder of the amount owed (approximately $38-39,000) to a 25 year loan and any amount remaining after the 25 years would be forgiven, but I would have to claim it as income and pay taxes on it.

I did not sign up for an interest only loan, but that is what I currently have.

Thank you.

Jody”

The Answer:

Dear Jody,

Student loan debt is one of the most oppressive forms of debt. Many people are currently facing the same burden as you are. As you are aware it is very difficult to discharge in bankruptcy. In many instances there is also no statute of limitations for collection. To top it off, a creditor has an easier time collecting student loans compared to other debts as they can often perform a tax intercept or wage garnishment without first filing a lawsuit.

Here’s a couple things you should look into. First, if you have been harassed by a collection company trying to collect the debt you should contact an FDCPA lawyer to pursue claims against the collector. Second, a reputable consumer attorney or debt settlement company could help you negotiate a lower payment. Just make sure to get copies of the promissory note and verification of the account. The numbers that you identified seem high and you should verify their accuracy. Finally, you can consult with another bankruptcy attorney as it has been more than seven years since your previous filing perhaps you can re-file and try to include some of these loans.

Jeremy Golden, Esq. is one of the resident debt experts here at GetOutOfDebt.org that helps people for free. Jeremy is a consumer rights attorney licensed to practice in California. He represents individuals in cases against debt collectors for violations of the FDCPA. He also focuses on defending people in collection cases who have been sued by their creditors or debt- buyers. In the last five years he has won at trial or obtained a dismissal in over 200 collection cases. Recently he was voted one of San Diego’s Top Attorneys in the field of Consumer Law by SDMetro Magazine. His website is goldencardona.com

If you have a debt collector question you’d like to ask just use the online form.

Student Loans – People Speak Out About Drowning in Student Loans

Steve Rhode — Tue, 18 Jan 2011 20:37:51 +0000

From How to Get Out of Debt

Here is our latest video on debt. This time it’s all about the burden of student loans.

Nothing says frustration like a lifetime of debt for a degree you never finished.

@GetOutOfDebtGuy

I Need Student Loan Forgiveness. – Jim

Steve Rhode — Wed, 27 Oct 2010 22:33:36 +0000

From How to Get Out of Debt

I am a sixty one year old male, married and I have five children (three steps and 2 bilogical). Many years ago I took out student loans totally aproximately $12,000.00. My wife at that time and myself got into financial trouble and had to file bankruptcy. I was told by our attorney that my student loans would be dismissed by the bankruptcy. Later, this attorney turned out to be my wife’s divorce attorney and that student loans no longer could be included in banruptcies. Anyway, that was later and in the meantime I moved several times and was not contacted by the loan people until years later and when my loan had grown to over $32,000.00. I cannot afford to raise my family and pay off that loan. I am a counselor for the State of Oklahoma, have two children in college and two more still at home – one just married. I heard that the President was suppposed to create a program to provide loan forgiveness for dummies like me. I am a veteran and served in Vietnam.

Are there any programs out there to help me get out from the debt of my student loans? I have worked my entire life and it is very embarrassing to have to ask for help. Whether you can help me or not – thank you for being willing to help individuals like me.

Jim

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I’m a Teacher. How Can I Get My Federal Stafford Student Loans Forgiven? – Aimie

Steve Rhode — Sat, 04 Sep 2010 17:39:29 +0000

From How to Get Out of Debt

Aimie

“Hi Steve,

I graduated from ORU in 2007 with 72k in school debt. I have been doing volunteer work for a year and have now been married and moved to NYC. I am working in a private Christian school as a teacher for the 3rd and 4th grades making a salary of 20k. I have been putting a 100% of my salary towards my school loans since I began working 3 months ago. I have not made a dent in my premium.

Are there any programs that can help me pay off my debt or even help me make a sizable dent in the premium? Are there any places I can get a better rate on my loan as my Federal Stafford loan charges me 7% interest?

Aimie”

The Answer:

Dear Aimie,

It sounds like you might be eligible for the Teacher Loan Forgiveness Program and that could eliminate a large part of your loan. It’s worth check out.

Teacher Loan Forgiveness Program – FFEL and Direct Loan Programs

To qualify for up to $5,000 loan forgiveness under this program you must not have had an outstanding balance on a FFEL or Direct Loan program loan as of October 1, 1998. To qualify for the increased amount of loan forgiveness up to $17,500 available for certain mathematics, science, and special education teachers, you must not have had an outstanding balance on a FFEL or Direct Loan program loan as of October 1, 1998, or on the date that you obtained a FFEL or Direct Loan program loan after October 1, 1998.

Although a summary of the new requirements is provided below, for complete information about this program, contact the holder of your loan.

To qualify, you must have been employed as a full-time teacher for five consecutive complete academic years in an elementary or secondary school that has been designated as a “low-income” school by the U.S. Department of Education.

Additionally:

At least one of the five qualifying years of teaching must have occurred after the 1997-98 academic year.
The loan must have been made before the end of the fifth year of qualifying teaching.
The elementary or secondary school must be public or private nonprofit.
A defaulted loan cannot be cancelled for teacher service unless you’ve made satisfactory repayment arrangements with the holder of the loan.

Each year, the U.S. Department of Education publishes a list of low-income elementary and secondary schools. To find out if a school is classified as a low-income school, check our online database for the year(s) you have been employed as a teacher. Questions about the inclusion or omission of a particular school must be directed to the state education agency contact in the state where the school is located and not to the U.S. Department of Education. Following is the list of low-income schools by year, up to the most recent year available:

Low-Income School Search

If your five consecutive complete years of qualifying teaching service began before October 30, 2004:

—You may receive up to $5,000 in loan forgiveness if, as certified by the Chief Administrative Officer of the school where you were employed, you were:

a full-time elementary school teacher who demonstrated knowledge and teaching skills in reading, writing, mathematics, and other areas of the elementary school curriculum; or
a full-time secondary school teacher who taught in a subject area that was relevant to your academic major.

—You may receive up to $17,500 in loan forgiveness if, as certified by the Chief Administrative Officer of the school where you were employed, you were:

a highly qualified full-time mathematics or science teacher in an eligible secondary school (for the definition of a highly qualified teacher, click here); or
a highly qualified special education teacher whose primary responsibility was to provide special education to children with disabilities, and you were teaching children with disabilities that corresponded to your area of special education training and have demonstrated knowledge and teaching skills in the content areas of the curriculum that you were teaching.

If your five consecutive complete years of qualifying teaching service began on or after October 30, 2004:

—You may receive up to $5,000 in loan forgiveness if you were a highly qualified full-time elementary or secondary school teacher.

—You may receive up to $17,500 in loan forgiveness if, as certified by the Chief Administrative Officer of the school where you were employed, you were:

a highly qualified full-time mathematics or science teacher in an eligible secondary school; or
a highly qualified special education teacher whose primary responsibility was to provide special education to children with disabilities, and you were teaching children with disabilities that corresponded to your area of special education training and have demonstrated knowledge and teaching skills in the content areas of the curriculum that you were teaching.

Interruptions in your school’s low-income designation

Your school does not have to be designated a low-income school in each of the five consecutive years. If you are teaching at a school listed as a low-income school for at least one year during your employment, your subsequent years of service at that school can be counted in the five consecutive years, even if the school is not designated as a low-income school in every subsequent year. For example, if you began teaching at a secondary school in the 1994-95 academic year, and it was designated as a low-income school in 1996-97, you may count your five consecutive years of service at that school starting with the 1996-97 academic year, even if the school is not designated as a low-income school in subsequent years.

Interruptions in teaching service

If you were unable to complete an academic year of teaching, that year may still be counted toward the required five consecutive complete academic years if -

you completed at least one-half of the academic year; and

your employer considers you to have fulfilled your contract requirements for the academic year for the purposes of salary increases, tenure, and retirement; and

you were unable to complete the academic year because:

you returned to school, on at least a half-time basis, to pursue an area of study directly related to the performance of the teaching service described above; or
you had a condition that is covered under the Family and Medical Leave Act of 1993 (FMLA)*; or
you were called or ordered to active duty status for more than 30 days as a member of a reserve component of the U.S. Armed Forces.**

Note that the period of postsecondary education, or an absence due to a condition covered under the FMLA, or active duty military service, including the time needed for you to resume teaching no later than the beginning of the next regularly scheduled academic year, does not constitute a break in the required five consecutive complete years of qualifying teaching service.

A borrower may not receive loan forgiveness for qualifying teaching service if the borrower receives an Americorps benefit for the same teaching service. For more information on AmeriCorps, click here.

How to apply

You apply for teacher loan cancellation after you have completed the five-year teaching requirement. Click here to print a copy of the Teacher Loan Forgiveness Application. Once you have completed the application, give it to the Chief Administrative Officer at your school to complete the certification section. That individual must certify that you have taught full-time for five consecutive years at that school, and

if you’re teaching in an elementary school, that you have knowledge of—or teaching skills in—reading, writing, mathematics, and other areas of the elementary curriculum;
if you’re teaching in a secondary school, that you are teaching in a subject area relevant to your academic major.

When your application is complete, submit it to your lender or loan servicing agency for processing.

Postponing repayment while under consideration for cancellation

You can get forbearance for up to 60 days while you’re completing the loan discharge application which includes the time it takes for the lender and guarantor to review it.

The loan holder or guaranty agency must notify you within 135 days of their decision on your application. If your application is approved, new repayment terms based on any remaining loan balances will be provided to you. The lender may cancel up to $17,500 of the aggregate loan amount that is outstanding after you’ve finished your fifth year of teaching. (The aggregate loan amount includes both principal and interest.) However, the lender cannot refund the payments you made before you completed the fifth year of teaching service.

Your lender can grant forbearance for each year of your qualifying teaching service if the expected cancellation amount will satisfy the anticipated remaining outstanding balance on the loan at the time of the expected cancellation. Unless you give your lender or loan servicing agency other instructions, your unsubsidized Stafford Loan balance will be cancelled first, followed by any outstanding subsidized Stafford Loan balance, and then any eligible outstanding Consolidation Loan balance. The lender may cancel only the outstanding portion of the Consolidation Loan that was used to repay subsidized or unsubsidized Stafford Loans that qualified for loan forgiveness.

Definitions:

“Academic year” means one complete school year at the same school, or two complete and consecutive half years at different schools, or two complete and consecutive half years from different school years (at either the same school or different schools). Half years exclude summer sessions and generally fall within a 12-month period. For schools that have a year-round program of instruction, 9 months is considered an academic year.

“Elementary school” or “secondary school” means a public or nonprofit private school that provides elementary education or secondary education as determined by state law (or by the U.S. Department of Education if the school is not in a state).

“Full-time employment as a teacher” is determined by the state’s standard. For a borrower teaching in more than one school, the determination of full time is based on the combination of all qualifying employment.

“Teacher” means a person who provides direct classroom teaching or classroom-type teaching in a non-classroom setting, including Special Education teachers.

To be a highly qualified teacher a public elementary or secondary school teacher must:

have obtained full State certification as a teacher (including certification obtained through alternative routes to certification) or passed the State teacher licensing examination, and holds a license to teach in that State, except that when used with respect to any teacher teaching in a public charter school, the term means that the teacher meets the requirements set forth in the State’s public charter school law; and

have not had certification or licensure requirements waived on an emergency, temporary, or provisional basis.

In addition —

An elementary school teacher who is new to the profession is considered highly qualified if s/he also:

holds at least a bachelor’s degree; and
has demonstrated, by passing a rigorous State test, subject knowledge and teaching skills in reading, writing, mathematics, and other areas of the basic elementary school curriculum (which may consist of passing a State-required certification or licensing test or tests in reading, writing, mathematics, and other areas of the basic elementary school curriculum).

A middle or secondary school teacher who is new to the profession is highly qualified if the teacher also:

holds at least a bachelor’s degree, and
has demonstrated a high level of competency in each of the academic subjects in which the teacher teaches by-
- passing a rigorous State academic subject test in each of the academic subjects in which the teacher teaches (which may consist of a passing level of performance on a State-required certification or licensing test or tests in each of the academic subjects in which the teacher teaches); or
- successful completion, in each of the academic subjects in which the teacher teaches, of an academic major, a graduate degree, coursework equivalent to an undergraduate academic major, or advanced certification or credentialing.

An elementary, middle, or secondary school teacher who is not new to the profession is highly qualified if the teacher also:

holds at least a bachelor’s degree; and
meets the applicable standards of an elementary, middle, or secondary school teacher who is new to the profession; or
demonstrates competence in all the academic subjects in which the teacher teaches based on a high objective uniform State standard of evaluation that-
- is set by the State for both grade appropriate academic subject matter knowledgeand teaching skills;
- is aligned with challenging State academic content and student academic achievement standards and developed in consultation with core content specialists, teachers, principals, and school administrators;
- provides objective, coherent information about the teacher’s attainment of core content knowledge in the academic subjects in which a teacher teaches;
- is applied uniformly to all teachers in the same academic subject and the same grade level throughout the State;
- takes into consideration, but is not based primarily on, the time the teacher has been teaching in the academic subject;
- is made available to the public upon request; and may involve multiple, objective measures of teacher competency.

Download a summary of this information

You can download and print out information in a convenient trifold Stafford Loan Forgiveness Program for Teachers Portable Document Format (PDF), which requires the Adobe Acrobat Reader. (You can download the Reader for free at the Adobe Web site.) The color PDF version works best if printed as a two-sided sheet and then folded into a brochure. This brochure can be duplicated but not sold.

Community service loan forgiveness

This provision excludes from income any student loan amounts forgiven by non-profit, tax-exempt charitable or educational institutions for borrowers who take community service jobs that address unmet community needs. For example, a recent graduate who takes a low-paying job in a rural school will not owe any additional income tax if, in recognition of this service, his or her college or another charity forgives a loan it made to him or her to help pay her college costs. This provision applies to loans forgiven after August 5, 1997.

*A serious health condition covered under the Family and Medical Leave Act of 1993 (FMLA) (19 U.S.C. 2654) “Serious health condition” includes an illness, injury, impairment, or physical or mental condition that involves.

inpatient care (i.e., an overnight stay) in a hospital, hospice, or residential medical-care facility. This includes any period of incapacity (defined to mean the inability to work, attend school, or perform other regular daily activities; includes pregnancy).
continuing treatment by (or under the supervision of) a health care provider for a period of incapacity (see above). It also includes a chronic or long-term health condition that is incurable or so serious that, if not treated, would likely result in a period of incapacity of more than three calendar days. Includes prenatal care.

**Army National Guard, Army Reserve, Marine Corps Reserve, Air National Guard, Air Force Reserve, and Coast Guard Reserve

Last updated/reviewed September 11, 2008 Source

Big Hug!

@GetOutOfDebtGuy

My Old Student Loans are Holding Me Down. – Sharon

Steve Rhode — Mon, 02 Aug 2010 20:55:45 +0000

From How to Get Out of Debt

“Dear Steve,

I took a quick, 9 month accounting course back in 1998, but through lack of employment, and neglect. the student loan for which I took to pay for the course has been in default for most of the past 11 years. After completing the course in which I maintained a 4.0 gpa, I was only able to achieve employment making less than $7.00 per hour. I was married, raising 3 kids and was struggling financially, soon became divorved, which put an even further strain on me financially, I lost my job, got into a bad relationship, ( which I am finally out of ) lost a brother, lost my father. I have been under a great deal of mental stress, financial stress and at this time in my life I have nothing to my name. My kids are grown, I am unemployed, struggling to find a job, which is not so easy these days, especially for a 48 year old woman who doesn’t have much job experience or training. I have tried to go back to school to get some kind of training so I can support myself properly, but have no money, and have been refused any more funding because of the previous student loan that has been in default for so long.

I need to get this student loan taken care of somehow so that I can get the training I need before I get too much older.

I need help desperately, and I just don’t know what I’m going to do.

Can you help me find a way to have the defaulted student loan of so long taken care of so that I can get the education and taining I need in order to be able to support myself at 48 years old?

Sharon”

The Answer:

Dear Sharon,

I really need more information about this old loan to advise you. It is important for me to know more about the loan. Was it a loan only from the school, a private lender student loan or a government backed student loan?

Please update me with your answers by posting your response in the comments section of your question.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

I Went Bankrupt in 2005, I am a Disabled Vet, and My Student Loans are Coming Due. – Ben

Steve Rhode — Tue, 22 Jun 2010 21:31:17 +0000

From How to Get Out of Debt

Ben

“Dear Steve,

I am about to turn 30 years old and my financial picture is basically in the dumps. I have a B.S. in accounting and for the moment a good job that pays me less than 95% of the rest of the world makes (less than $30k/yr and not a single benefit). I am a disabled Vet and get approximately $450/month from the VA. Since getting out of the military (due to a pretty bad eye condition) my work history is spotty. I recently learned (through the help of a family member who is a nurse) that I have an extreme case of ADHD. That, coupled with bad eyes, makes it nearly impossible for me to work on a cpu for any length of time.

I’m also having to take off work to drive 90 miles each way to the eye doctor, at least once a month, many times several times a month. I think these 2 things have made holding a job very difficult as no one wants to hire someone who has the issues I have (had several potential employers tell me they don’t like my eye issue, so no job).

Because of my work history, I had to declare Ch. 7 back in 2005. Since then, I started rebuilding my credit and was doing pretty well. I had a decent job, 3 credit cards with decent balances and all were being paid on time every month. Then the economy tanked and I lost my job. I ended up being unemployed for almost 6 months. 2 of the 3 credit cards are now with collection agencies, along with some other bills for a total of approx. $8000. I also lost my car that I had owned for about 6 months. They have yet to auction it off, but I’m guessing that I will owe approx. $20,000 once the final figures arrive.

Oh, I do have about $30,000 in student loans that I have to start paying back in June.

My question is this……….where do I start? Some have said to save $500 first and then pay off the accounts, smallest balance to highest balance. Some have said to save a little bit, but put the majority of extra money towards paying things off. Some have even said to save up 3 months of expenses and then start paying things off…….which to be honest would probably take me at least a year to save up that much.

I hope to have a change in living expenses during the summer, but at the moment I want to get whatever done that is possible. I’m looking at maybe getting married soon and its not fair for me to bring this baggage into the marriage if at all possible. I just don’t know where to start this endeavor of getting debt free.

Ben”

The Answer:

Dear Ben,

First off let me tell you how much I appreciate your effort to serve in the military. It can truly be a sacrifice.

I think what we need to look at here is what reality is for you and then where do we go from there.

The undisputed facts are that you:

have an ongoing ophthalmic condition which impacts your eyesight in some way. You also may have some sort of adult attention deficit disorder which makes it hard to concentrate.
are gainfully employed and as long as you are not living in a major metropolitan area you might be able to get by on what you are earning. Plus you get a monthly VA benefit that supplements your income.
previously had a chapter 7 bankruptcy in 2005.
have student loans are going to begin soon.
are going to be getting married in the near future.

The question about how to best pay off debt is really based upon your personality. For you, when you do start to repay these past debts I would suggest that you pay off the smallest balance debts first. Here’s why.

You’ve given me every reason to believe, with your history, that you will do best with frequent positive reinforcement to begin your debt journey. The best way to get that is to actually eliminate debts that you owe. The joy of having one less creditor to pay next month is a great feeling to have. With the encouragement of knocking off the smallest creditors first, and then only leaving you with one or two long term creditors to pay off, you can then focus on those. This is the debt snowball method of reducing your debt.

Your repayment dollars available is going to be determined by how much is leftover after making your new student loan payment. The student loan payment is going to be a top priority for you. After that I would make at least the minimum payments due on your other debts and then save the rest of your cash in a boring old savings account.

You will need to have cash on hand in case you were to lose your job or for some other unexpected expense. And you statement that it would take a year to save three months of expenses just tells me that you don’t have much cash on hand right now. The more you can save, the better you will be able to face any unexpected expense in the near future. I’d suggest that you at least cram several thousand dollars away first as a start.

Regarding the marriage situation. I think that if you have an open and honest discussion with your girlfriend about where you stand and what life would look like when you combine your income and expenses, that it will help. You also need to have an idea of what, if any, debt she is bringing to the marriage. Better to be open and honest now than surprised and upset latter.

Debt is not a good reason to avoid love and happiness. Hell, it’s like saying she would not want to marry you because you have an eye condition. It just is what it is. It’s a thing, or another condition.

My biggest concern is the bill you are going to get from the car repossession and auction. It is going to be a doozy and if the payment demands become too much for you to cope with, between that and your other debt, there is always a chapter 13 bankruptcy to force a payment plan you can afford. That payment plan would be at 0% interest and would be determined after reviewing your income and expenses, rather than what the creditors might demand from you. By the way, student loans can’t be included in bankruptcy.

Big Hug!

@GetOutOfDebtGuy

Drowning in Student Loans?

Amanda Miller — Tue, 08 Jun 2010 01:19:15 +0000

From How to Get Out of Debt

If you can’t make payments on your student loans, don’t panic. Don’t just give up and invite default, either. Default means that your credit will be damaged and your loan balance will increase dramatically with the addition of collection fees. And once you default, the holder of your loan will probably grab a portion of your paycheck and nab any tax refund to which you are entitled. If you’re really unlucky, you’ll be sued. Don’t expect to be able to discharge your student loans in bankruptcy. It is nearly impossible.

Fortunately, all student loan lenders offer a variety of repayment plans. So if you can’t afford your current payments, don’t assume that your current repayment plan is the only possible one. Consider all of the possible options available to you.

Standard Repayment Plan

The original repayment scheme offered by your lender is known as a standard plan. With a standard plan, you usually pay the same amount each month for 10 years. Standard repayment plans come with the highest monthly payments but cost the least in the long run because the loans are paid off the quickest — meaning you pay less interest than you would pay with other repayment plans.

Graduated Repayment Plan

Under a graduated plan, your payments start out low and increase every few years. This is often the best option for people just starting a career or business who have a low income that’s likely to increase steadily over time.

If you qualify for the graduated plan offered under the federal Direct Loan Program, your payments start at as little as half of what they would be under the standard plan, and then increase every few years. Other lenders’ plans vary. Some require that you pay only the interest on your loans for a few years. Then you switch to payments of principal and interest until your loan is paid off.

With any graduated repayment plan, you’ll pay more for your loan over time than you would under a standard plan. Because interest charges are based on your unpaid balance each month, if you keep a higher balance in the early years of your loan, interest will add up quickly.

Extended Repayment Plan

Under an extended repayment plan, your payback term stretches over a period of 12 to 30 years, depending on your loan amount. Your fixed monthly payment is lower than it would be under the standard plan, but you’ll pay more interest because the repayment period is longer.

Most lenders let you combine the extended plan with graduated payments, which will lower your payments even further but increase your overall costs even more.

Income-Contingent or Income-Sensitive Repayment Plan

Under an Income Based Repayment (IBR) plan, each year your monthly payments are recalculated based on your prior year’s annual income, household income and loan amount. The amount you pay annually will never exceed 20 percent of your discretionary income — that is, your annual gross income less an amount based on the poverty level for your household, as determined by the Department of Health and Human Services. To qualify for an income-contingent plan, you must authorize the IRS to release your income information to the Department of Education.

If your income is very low, you may not be required to pay anything under an income-contingent or income-sensitive plan, or the amount you pay each month may be less than the amount of interest that is accumulating. This may feel like a relief, but be aware that as time goes on, your loan balance will continue to increase and eventually it may seem as if you’ll never get out from under it.

If you’re paying under a federal direct income-contingent plan, the government will forgive any balance remaining on your loans after 25 years. Private lenders’ incomes-ensitive repayment plans contain no provision for loan forgiveness after 25 years.

Loan Consolidation

With loan consolidation you can lower your monthly payments by combining several loans into one packaged loan and extending your repayment period.

As with other low payment options, consolidating your loans will greatly increase the amount of interest you pay over the life of your loan. You may also be able to refinance several loans, or just one loan, to secure a lower interest rate. This is also called consolidation.

Many different lenders offer consolidation loans. Your repayment options will vary slightly depending on the lender you choose. For example, to consolidate under the federal Direct Loan Program you must either:

have a federal direct student loan, or
have tried and failed to obtain a consolidation loan with terms as good as those offered by the government.

Consolidation lenders generally allow you to stretch the term of your loan to 12 to 30 years, depending on your balance. You can choose a fixed monthly payment for the life of the loan or a graduated payment plan.

If lengthening the repayment period doesn’t bring down your monthly payment enough, you can choose a payment plan based on your income level. Income-contingent and incomesensitive plans are available for most consolidation loans.

Canceling Your Loans or Postponing Payments

If you’ve considered all repayment options and you still can’t pay, all is not lost. In certain limited circumstances, you may be able to cancel your student loans. If you can’t cancel your student loans, you can probably find a way to postpone making payments by obtaining a deferment or forbearance.

A deferment is a delay based on a specific condition — such as returning to school or being unemployed — that excuses you from making payments for a set period of time.

A forbearance is permission from your loan holder to stop making payments for a set period of time. Forbearances are easier to obtain than deferments because they are not tied to the type of loans you have or the date you obtained them, but they cost more. With a deferment, interest usually stops accruing. Not so with a forbearance. Here are the rules for cancellation and deferment for most federal loans.

Death of the borrower. If a former student borrower dies, the executor can cancel any federal student loan.
Permanent total disability. You can cancel any federal student loan if you are unable to work or go to school because of an injury or illness that is expected to continue indefinitely or result in your death.
Temporary total disability. If you, your spouse or a dependent is temporarily totally disabled, you can defer the payments on most loans for up to three years.
Enrollment in rehabilitation program for the disabled. If you are enrolled in a rehabilitation program for the disabled, you can defer payments on most loans.
Unemployment. You can defer the payments on most loans, usually for up to three years if you are unemployed but looking for work.
Economic hardship. You can defer payments on federal loans that meet certain conditions for up to three years if you are suffering an economic hardship. You are automatically entitled if you receive public assistance. Otherwise, qualifying is based on a mix of your income, the federal minimum wage, the federal poverty level and your monthly or annual federal student loan payments.
Parents with young children. If you are a working mother or a mother or father on parental leave, you can often defer your student loan payments.
Enrollment in school. If you return to school to study at least half-time, you can almost always defer the payments on your student loans.
Membership in a uniformed service. If you currently serve the U.S. government in the U.S. military, the National Oceanic and Atmospheric Corps or the U.S. Public Health Service, there are several situations in which you may cancel or defer your loans.
Teaching needy populations. If you teach certain needy populations — including low-income or disabled students — you may be able to have your student loans canceled or the payments deferred.
Providing services other than teaching to needy populations. If you serve certain needy populations (in a capacity other than teacher), you may be able to have your student loans canceled or payments deferred.
Performing community service. In many situations, you can partially cancel your student loans or defer your payments in exchange for performing community service. Opportunities range from serving in the peace corps to volunteering your time with an organization that assists low-income people in your community.
Working in the healthcare profession. If you are a healthcare professional, such as a nurse or a physician in your residency, you may qualify for loan cancellation or deferment.
Working in law enforcement. Full-time law enforcement and corrections officers can cancel some older Perkins Loans.
Attended a trade school. Many former students were lulled into taking out student loans to attend a trade school, only to have the school doors close before they could finish the program. Other students were falsely certified by school officials as being able to benefit from the loan. If this happened to you, you can probably cancel 100 percent of your federal student loan.

To apply for a new repayment plan, cancellation, deferment or forbearance, get in touch with the holder of your loan. If you are not in default, the holder of your loan is where you send your payments.

It can be tricky finding the holder of your loan. If you are in default, you may not know who the holder of your loan is. If you don’t know, contact either the Federal Student Aid Information Center or the Department of Education’s Debt Collection Services Office.

Options When You Have Defaulted on Your Student Loan

A loan generally defaults when payment has not been made for more than 180 days and no payment arrangements have been worked out with the lender. If you defaulted on a federal student loan, you may be able to get out of default by requesting a reasonable and affordable repayment plan. Under this plan, the debtor asks the holder of the loan to allow payment that is reasonable and affordable.

According to Robin Leonard, author of Take Control of Your Student Loan Debt, published by Nolo Press, you should request a plan by saying one of the following:

“I want a reasonable and affordable repayment plan to renew my eligibility.”

“I want to rehabilitate my loan.”

“I want to qualify for loan consolidation.”

Different lenders may use slightly different lingo but one of the above should be understood by your lender.

The lender considers several factors in deciding what amount is reasonable and affordable for a particular debtor. These factors include the debtor’s disposable income (how much money you are left with after deductions like Social Security, taxes, child support, etc.) and necessary expenses (food, housing, utilities, etc.).

There are no formal rules specifying what amount is considered reasonable and affordable. Payment plans are designed to fit the particular situation of the debtor requesting it.

When requesting a plan, you want the lender to have an accurate picture of your finances. Send the lender copies of documents showing your expenses each month. Often, the lender will have a form on which you record and submit this information.

Within a few weeks, the lender will consider your request and will let you know the amount it expects you to pay each month. If you can’t pay that amount, you should contact the lender immediately. You are only given one chance to get out of default. If you agree to make payments and then fail to pay, you probably will not have another opportunity to get out of default in this manner.

After you have made six consecutive on-time payments, you will be eligible to apply for new federal loans.

To bring your loan out of default status, you will need to make 12 consecutive timely payments. Once your loan is out of default, you can apply for a deferment. Throughout the repayment period and until a loan or deferment is granted, you will need to continue to make payments.

After your student loan is no longer in default, you should obtain a copy of your credit report. If there is still an entry indicating that your loan is in default status, you may want to file a dispute with the credit bureau.

After you make 12 consecutive payments, you are entitled to have the default status removed from your credit report. Attach a copy of any documentation you have proving that your loan is no longer in default. The credit bureau must investigate within 30 days and must remove derogatory information from your credit report about your student loan that is inaccurate.

Defaulting on your student loans is serious business. Lenders and the Department of Education spend significant resources trying to locate people who have loans that have gone into default.

If you are given an opportunity to repay your debt and remove the default status, you should make sure you make each and every payment exactly according to the terms the lender has given you. Otherwise, you will have squandered your chance to get rid of the default.

Student Loan Debt: The Next Subprime Bubble to Burst?

Steve Rhode — Wed, 05 May 2010 11:00:59 +0000

From How to Get Out of Debt

I just finished watching the Frontline PBS show College, Inc. about for-profit education and the resulting student loan debt.

It was estimated that students in for-profit colleges will graduate with double the amount of student loan debt as compared to a traditional university.

The default rate was alarming as well. For-profit colleges account for 10% of students but 44% of student loan defaults.

Readers will recognize that I have always been critical of student loan debt. Why? For most students, the resulting debt is debilitating.

Many people would be surprised to learn that outstanding student loan debt is just about the same as all outstanding credit card debt. And also surprising, about 75% of students that start school never finish with a college degree.

If you would like to watch the College, Inc. show, click here.

@GetOutOfDebtGuy

We Are Making More Money Than Before But Slipping Further Into Debt. – Lynn

Steve Rhode — Sun, 18 Apr 2010 01:07:25 +0000

From How to Get Out of Debt

“Dear Steve,

My husband and I are making more money than ever before but keep getting further in debt. We used up our savings 2 yrs ago due to being out of work for an illness and had to use credit cards to make ends meet. The balances grew so that when both our jobs became stable again we were in enough trouble that we are living paycheck to paycheck. In the middle of all of this we had a child turn 16 so we had a substantial increase in car insurance and gas prices hit $4.50 per gallon! The spiraling continued. We are going to have to do something and are trying to learn about all options.

My biggest worry is that our child is a senior and has started applying to collleges and what if any impact will a DMP , DSP or bankruptcy have on applying for financial aid. Not being able to apply for any loans or cards for a certain amount of years while our child is off at college concerns us. We need help now but should we wait until everything is finalized for college before we start anything?

Thanks for your honesty and help in advance

Lynn”

The Answer:

Dear Lynn,

Oh the old college financing panic. I recognize it well. Many have experienced it.

So here is the problem. For whatever reason you are currently living unsafely, paycheck to paycheck. Your savings is drained and before we worry about student loans, do you have any plan on how or if you are going to have any cash available to pay for books and miscellaneous stuff for school?

Fuel prices will go back up again and winter will lead to higher utility bills. How are you going to deal with that, even if you have a child headed to college?

What I generally suggest is if the parent is not in a position for college loans for their child there is nothing that prevents the child from taking out the loans that the parent then repays. The best bet on financing options would be to make an appointment to talk to the financial aid office at the school your child will attend. There are so many options and the financial aid office is motivated to close deals for financing, like a car dealer, and wants to sell the admission slot.

So my priorities are a bit different than your, my biggest worry is you. You are stripped to the bone here as far as financial protection goes. Just one unexpected expense or an accident will break your financial back. Let’s keep in mind that you are just making it from paycheck to paycheck and have nothing to speak of in savings.

A debt management plan or a debt settlement program does not seem like a logical way to tackle the situation. In both a debt management program or a debt settlement program you will need to make monthly payment over a number of years to eliminate your debt. Your situation requires more immediate intervention and like it or not, the honest best answer here is probably going to be to explore bankruptcy.

If you are able to discharge your debt or get a reduced repayment plan based on what you can afford then you can start rebuild your life. Rather than living month-to-month you can begin to start over. Instead of spending years trying to repair the past you can focus on repairing the future.

Before you make one single assumption about bankruptcy you owe it to you and your family to go talk to a local bankruptcy attorney about your situation. Meeting and talking to a bankruptcy attorney does not mean you are going to file, it means you are going to learn.

If I could give you homework I’d assign you a field trip to the local bankruptcy attorney and then have to check back in and report what you learned in the comments below.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I Have Two MBAs But Need Financial Help. – Oshana

Steve Rhode — Sat, 10 Apr 2010 16:37:59 +0000

From How to Get Out of Debt

Oshana

“Dear Steve,

Steve…thank you for your fine work…..I am a management consultant and writer with 2 MBA’s and wonderful experience afer 17 years in the field. I am now charging more for my services and getting it, am becoming recognized in my field and
have a book. I have 2 questions:

1. Have a credit card and line of credit from Wells Fargo….no bank will consolidate them for me so that my balances are 40 or 50% instead of 80 or 85% of each of them…..I do not want to go the traditional debt consolitaton route because I believe some institution will do this for me……is there a bank or lending institution I can talk to…..before they run my credit?

2. How many points does my credit score go down every time my credit is run or is it a certain number of times per month?

3. Would you be willing to look at my credit report and read it for me? for a fee f course

4. I also have a student loan – $140,000 now and start repayment in January at $650 a month…..would this company be willing to forgive some of it as I have been working with grassroots organizations who could not pay a normal
consulting fee….this request falls outside of the Federal Government Guidelines….but I feel it is reasonable…

Oshana”

The Answer:

Dear Oshana,

1. Ha Ha Ha. No. The best best would be to use the online credit card finder tool to locate a bank that would best fit what you are looking for.

2. I don’t know. That would be part of the super secret formula that is not shared with the public.

3. You don’t need to pay me to do that. Just order a copy of this consolidated credit report with the credit score option. It is the consolidated credit report that I use and it will show you everything, give you all the contact information you need and the credit score will explain why your is what it is.

4. Nice try, but no. There are only a few reasons why a student loan will be reduced or discharged. See the Loan Cancellation & Discharge page on the Federal Student Aid site. Unfortunately the student loan lenders feel that if you have been under-earning to service their loan, that’s your own fault.

There are some groups that will offer some loan forgiveness for your help and participation.

AmeriCorp – Details
Peace Corps – Details
Military and National Guard Service – Details
More Programs – Details

Steve

Hi Steve, I Have Another Question For You About My Student Loans. – Samantha

Steve Rhode — Fri, 02 Apr 2010 22:34:07 +0000

From How to Get Out of Debt

Samantha

“Dear Steve,

Hi Steve, You were already kind enough to answer one of my questions (re: out of control Private Student Loans) and am now hoping that you can help with a follow-up question.

I recently earned a decent-sized bonus at work that I’d like to throw towards some of my student loan debt. The amount is large enough to either completely wipe out one of my smaller loans that has a 7.75% interest rate, or to put a dent into one of the very large loans that carry a 9% interest rate. In your opinion, is it better to wipe out a small loan completely or to take a chunk out of a larger loan?

Thanks so much!

Samantha”

The Answer:

Dear Samantha,

The answer to your question is rooted in emotion, not logic. The logical answer is that the bigger bang is achieved by applying the money towards the higher interest rate debt. But for many people, myself included probably, I would get great emotional satisfaction in knocking off one loan completely.

If you then take the minimum payment that you were sending on the smaller loan and send it in addition on the bigger loan, that will help to pay the larger loan off faster.

If you don’t have any money is savings, you might want to withhold some of the bonus and start to build an emergency fund.

Big Hug!

@GetOutOfDebtGuy

I Am a Single Mother And Going Back to School for Nursing. – Tanya

Steve Rhode — Fri, 26 Mar 2010 21:15:25 +0000

From How to Get Out of Debt

Tanya

“Dear Steve,

Hello, I am a single mother with two children. I have decided to go back to school for nursing, but it is impossible to do so and have or get a job willing to work with the hours that the school requires. I am thinking of getting a loan that would cover my children and myself living expenses for two years.

Unfortunately, that is about $45000-$50000. That will cover my bills which is about $39000 and cover school monthly expenses. And still that is cutting it close. I do not know the best way to get a loan and I am also wondering, when my car lease is up in September, will I be able to get a loan to get another car as I will have such an outstanding amount pending, granted I do get the personal loan. I am so confused, please lead me in the right direction. I need to do something to gain some sort of stability for my children and myself. Thanking you in advance for your help.

Should I take the loan? Where is the best place to get it, bank or where? How would that affect my credit and in September when trying to get another car, would I be able to buy another instead of leasing or will they not be able to grant me a loan and should I just buy the one I have. Not really sure how to put the last question.

Tanya”

The Answer:

Dear Tanya,

A loan does not seem like a realistic way to proceed. I don’t know of anyone that would give an unemployed person an unsecured loan for such a large amount, even if you were going back to school. And on top of that the car issue is a big problem as well. When that ends you will then be an unemployed person with a huge loan and in need of new transportation.

I’m afraid I’m going to have to send you back to the drawing board and ask you to rethink this plan so you can find a way to save the money to live on in advance of going back to school or find a way to work while you are back attending school.

You might want to ask the financial aid office at the nursing school if they have any suggestions to see if your student loan could be expanded to cover any extra expenses. However, that approach is not without significant risk as well. If for some reason you did not finish nursing school you would be left with debt that could not be discharged in bankruptcy and you would be on the hook for the entire student loan balance for the rest of your life.

Big Hug!

@GetOutOfDebtGuy

I’m a Grandmother and Getting My Social Security Check Garnished For Student Loans. – Janis

Steve Rhode — Sun, 14 Mar 2010 18:18:40 +0000

From How to Get Out of Debt

“Dear Steve,

I’m a 68 yr old grandma of 2 young (10/14 yr old) grandchildren. I went to college to upgrade my employment status in 1998 or 1999, I don’t remember. I finished in 2000 and at that time had a student loan balance of about 3500.00.

Could not find a job and had to request forbarence to carry me. Over the years I forgot about the loan, dealt with poor health, had brain surgery in 2006 and the collection agents decided to collect for the loan in 2008.

Mind you, at no time during the 6-7 year gap did anyone remind me or let me know that I could make a minimum payment on the loan. Now that I am on Social Security, ( have been since I was 62) they have decided to garnishee my SS check to the tune of 15%.

I have not been employed since 2004 and have the two dependents who are not included on my check. I do not have enough income to have them take that amount of money from an already insufficient monthly income.

I don’t dispute that I owed them the 3500.00 but am wondering why they let it build up to somewhere around 17,000/20,000 before they attempted to collect. When I tried to reach some agreement with the collection agency they said I would hve to pay at least 250.00 per month and I just could not afford that.

I might add that they informed me of the offset to my check about 3 months before it was to happen. I have requested an appeal but have no response as yet. I have not even filled out any hardship forms.

I have an attorney (I think) looking into this but he gives me no response as yet. I have been looking for part-time work but I think that because of my 13 pages of student loan on the report no one is willing to hire me. The even have the wrong dates on the report. It is reported like it just happened recently (06, 07) and that is not true. My associate degree is dated December 2000.

Is there anything I can do to relieve some of this pressure as my granddaughter is graduating from middle school in may and going on to high school and I expect to have lots of expenses.

Janis”

The Answer:

Dear Janis,

Most people thing that their social security can’t be garnished, but we both know that’s wrong and it can be under certain situations.

Section 207 of the Social Security Act (42 U.S.C. 407) protects Social Security benefits from assignment, levy, or garnishment. However, the law provides five exceptions:

Section 459 of the Act (42 U.S.C. 659) allows Social Security benefits to be garnished to enforce child support and/or alimony obligations;
Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows benefits to be levied to collect unpaid Federal taxes;
Section 3402 (P) of the Internal Revenue Code allows beneficiaries to elect to have a percentage of their benefits withheld and paid to the Internal Revenue Service to satisfy their Federal income tax liability for the current year;
The Debt Collection Act of 1996 (Public Law 104-134) allows benefits to be withheld and paid to another Federal agency to pay a non-tax debt the beneficiary owes to that agency. (And this is what your student loans fall under): and
The Tax Payer Relief Act of 1997 (Public Law 105-34) authorizes the Internal Revenue Service to collect overdue federal tax debts of beneficiaries by levying up to 15 percent of each monthly payment until the debt is paid.

According to the Department of Education website, there is a process to ask for relief from the Social Security garnishment.

Federal law authorizes the Department or the student loan guarantor that holds a defaulted loan to collect the debt by non–judicial wage garnishment – a withholding order issued by the Department or the guarantor without the need for entry of a court judgment against the debtor.

Prior to garnishment, the debtor must be offered an opportunity to repay the debt voluntarily or to obtain a hearing at which the debtor may object to garnishment either because the debtor believes that the debt is not owed, or that garnishment would cause financial hardship.

To avoid garnishment, a debtor must object within the deadline explained in the notice – failure to do so will result in issuance of the garnishment order. A debtor who misses the deadline may obtain a hearing on a financial hardship objection, but withholding may start and continue through the hearing process.

Hardship objections must be presented to the party – the Department or the guaranty agency – that sent the notice. If a debtor misses the deadline but requests a hearing, garnishment may start but cannot continue for more than 60 days from the hearing request date, unless a decision is issued that garnishment should continue.

If you are unable to afford to make payments toward your defaulted loan, you should complete and return a “Statement of Financial Status” along with evidence of your current financial situation, which evidences your inability to pay (i.e. paycheck stub, copies of billing statements) to the servicing agency or the collection agency servicing your account. Based on the information provided, a payment plan which is both acceptable to the agency, and affordable to you, will be established.

If you have already followed the dispute process but you have not heard anything back, you may want to contact the Department of Education at drghelp@ed.gov and ask for them to examine your claim.

However, I would not use the “never contacted” excuse. They are fairly clear about that. Here is what they say.

You must make payments on your loan even if you do not receive a bill or repayment notice. Billing statements are sent to you as a convenience, and you are obligated to make payments even if you do not receive any notice from the holder of the loan. If you have not received any billing statements from us, you may not have properly notified the servicing agency of your current address.

Big Hug!

@GetOutOfDebtGuy

I Left an Abusive Boyfriend 9 Months Ago and I’m Trying to Start Over. – Jen

Steve Rhode — Mon, 08 Mar 2010 19:04:36 +0000

From How to Get Out of Debt

Jen

“Dear Steve,

I’m on disability. I left an abusive boyfriend 9 months ago and I’m trying to start over again.

I already have student loans I can’t pay back. Which I will have to deal with as I can. I ended up leaving school due to illness.

I’m worried mostly about the credit cards I got in my name and the ex used, because they’re the only ones I can do anything about right now. My doctor has suggested I try to take a proactive step here, the stress about everything is worsening my condition.

So I’ve been considering bankruptcy, but I can’t afford to pay a lawyer. Things are looking bleak.

Is it possible to get a pro-bono lawyer? How do you find one?

Jen

PS- I love your site, you’re always so nice and so helpful. Thank you in advance.”

The Answer:

Dear Jen,

I’m so sorry to hear about your situation. Nobody should have to live through an abusive situation.

If they are government backed loans I would suggest you look into the Income Based Repayment (IBR) program. If you are on full and permanent disability there are some other programs to deal with student loans that might actually discharge your loans.

Regarding the bankruptcy, there is a pro-bono resource website you can visit for a list of lawyers that might be able to help you for free.

I agree with your doctor that taking some control over your situation will be the first step back up. It will empower you to no longer be the victim in this financial mess and to start acting, instead of simply reacting. Bankruptcy will improve the quality of your life because it will reduce your stress and constant worry. That can go a long way to helping you live a better life.

Please let me know what you decide to do and keep me posted along your journey. I really want to be there as you recover.

Big Hug!

@GetOutOfDebtGuy

I Can’t Repay My Student Loans I Had When My Husband Was in the Military. – Debbie

Steve Rhode — Wed, 03 Mar 2010 21:37:46 +0000

From How to Get Out of Debt

“Dear Steve,

My husband was in the military and i went to college for almost 2yrs then he was deployed to europe, the family had to follow. i was unable to finish school. he then went off to the iraq war and got medically boarded out of the army. unfortunatley it took a toll on the family and we are no longer married. i have no means to pay for the student loan being a single parent. is there some kind of forgiveness plan for spouses of the military since i couldnt finish my schooling. now the loan is in default. thank you.

Debbie”

The Answer:

Dear Debbie,

Who are your student loans with? Are they private or government backed loans?

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

My Parents Defaulted on My PLUS Loan And Now My Credit Has Been Damaged. – Melissa

Steve Rhode — Tue, 02 Mar 2010 16:37:19 +0000

From How to Get Out of Debt

“Dear Steve,

My parents defaulted on a PLUS loan now my credit has been severely damaged.

My parents took out a PLUS loan for my college tuition. It is now defaulted. I can’t figure out why my credit is now severely damaged when the loan is not in my name or social security number. I am having a hard time just paying back my loans, now theirs as well. Is it legal for my credit to be ruined if the loan wasn’t taken out in my name? Also, if I start a payment plan will my credit still be damaged, or how long will it take to recover? Help!

Melissa”

The Answer:

Dear Melissa,

Hum, odd. Generally PLUS student loans are taken out by either the graduate student or the dependent parent on behalf of the student. Most often we think about PLUS loans as being parent only.

If the loan was solely a parents PLUS loan then I can’t find anything that would make you responsible for that debt.

What I’m afraid has happened here is that your parents served as an endorser or cosigner for your PLUS loan and when they stopped making payments on your behalf, the loan became your responsibility. This could happen if you were a graduate and using a graduate PLUS loan for more advanced studies.

I wonder if the original application was in your name and your parents agreed to pay for it. It’s worth checking on that with the student loan servicing company and try to get some clarity on the specifics of the original loan.

Get some more information and give me an update so I can do some more digging for you.

Big Hug!

@GetOutOfDebtGuy

What Can I Do to Get Help With My Student Loan Payments? – Robyn

Steve Rhode — Mon, 01 Mar 2010 15:05:08 +0000

From How to Get Out of Debt

“Dear Steve,

I am a single parent of 3 and declared bankruptcy in 2006 My ex let our house go into foreclosure) I receive less then 850.00 A MONTH for my children as my ex collects disability. My annual income is 36,000. I have been unable to pay my student loans for the past 5 years, They went into default. My income tax return was attached for 2008 to pay for my loans. I contacted the lender three weeks ago and the best repayment offer they had was for 300.00 a month. The total loan is 31,000.It is the total consolidated of my under graduate and graduate school loan. My first loan was from 1987, my second loan was from 1999 I have exhausted forbearance, and there are no more consolidations available. If I don’t pay now, they are going to attach my wages. and only earn 36,000 a year.

What can I do to get help with my student loan payments.

Robyn”

The Answer:

Dear Robyn,

Hopefully these are government backed student loans and not private loans or through SallieMae.

If they are government backed loans then look at the Income Based Repayment program (IBR) and that should give you the most affordable payment based on your income.

You need to get them out of forbearance as soon as possible, That just keeps building up what you owe rather than helping.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I Don’t Have Proof That I Paid My Student Loan in Full. Debt Collector is Calling. – Howard

Steve Rhode — Sun, 28 Feb 2010 16:48:06 +0000

From How to Get Out of Debt

Howard

“Dear Steve,

I recently recieved a letter from a debt collector stating that I owed money from a perkins loan that was made in 1992. I tried to call the school but they referred me to the collection agency. I do not have proof that I paid this debt in full some 10 yeas ago

Can these people start persuing me and put this information on my credit report now

Howard”

The Answer:

Dear Howard,

That’s pretty damn unfortunate that you don’t have any proof that you paid it.

Generally a bad debt is only reported for seven years from the date is was first listed, but like a lot of things about student loans, there are some subtle differences.

Notwithstanding paragraphs (4) and (6) of subsection (a) of section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c (a)(4), (a)(6)), a consumer reporting agency may make a report containing information received from the Secretary or a guaranty agency, eligible lender, or subsequent holder regarding the status of a borrower’s defaulted account on a loan guaranteed under this part until—
(1) 7 years from the date on which the Secretary or the agency paid a claim to the holder on the guaranty;
(2) 7 years from the date the Secretary, guaranty agency, eligible lender, or subsequent holder first reported the account to the consumer reporting agency; or
(3) in the case of a borrower who reenters repayment after defaulting on a loan and subsequently goes into default on such loan, 7 years from the date the loan entered default such subsequent time.

Your question sounds like the debt is not currently reported on your credit report. A debt collector could get it erroneously re-listed by reporting the wrong initial date.

As far as if it is collectible, if it is in default, it is collectible until you die.

Big Hug!

@GetOutOfDebtGuy

I Keep Losing My Tax Return to Student Loans. – Laurie

Steve Rhode — Wed, 24 Feb 2010 17:08:18 +0000

From How to Get Out of Debt

“Dear Steve,

In 1994 I went to beauty college and was married and really couldn’t afford it so I got a student loan and then I was working for regis hairstylist and hurt my back and they wouldn’t take me back…then got a job doing janital work and broke my back and couldn’t work for 6 yrs. and lived on 500.00 dallors a month on labor and industries…in 2007 a wonderful Dr. took out the hardware I had in my back and was able to return to work but all I can find to do is seasonal…and now they are taking my income tax for my student loan and it is hurting me finanially…that I may loose my house…I have already lost everything else…is there any relief for me, thank you for reading hope to hear from you,

Laurie”

The Answer:

Dear Laurie,

Since you are not permanently disabled and your loan is clearly in default, your options are limited. If this is a government backed loan then you may want to explore the Income Based Repayment program (IBR) and see if that might give you some break.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I Owe $100,000 in Student Loans and Make $30,000 a Year. – Lex

Steve Rhode — Mon, 22 Feb 2010 21:47:56 +0000

From How to Get Out of Debt

“Dear Steve,

I completed an undergraduate education with $100,000 of student loan debt (half government/half private) I’ve increased my income to $30,000/yr. and still can’t afford to live modestly and pay my debt. I am 4months behind on repayments. My minimum payment due next month is ~$7,000 most of which is interest. It is IMPOSSIBLE for me to pay this in ONE YEAR, yet alone one month. There is no way I can ever pay this, yet alone get ahead and dream of having a home or a family. Not to mention, I have ~$1000 in major credit card debt which I have managed to reduce and control… but the student loan overhead is IMPOSSIBLE to recover from… Can you PLEASE HELP ME!!

Lex”

The Answer:

Dear Lex,

Help is really only available for the government backed student loans. The private students have no real options.

On the government backed loans look at information about the Income Based Repayment (IBR) plan. That is your best shot at getting those debts under some sort of control.

It is of little comfort now but any investment has to be weighed by its rate of return. A $100,000 education can’t survive on $30,000 of occupational income. The equation needs adjustment. Either a cheaper school would have been more in order for the field of that income level or a new job should be sought with a higher income in the same field.

This is exactly why many people graduate and have to embark on a career different than their schooling just to pay the bills. Their dream ends at graduation.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I’m Living Off My Student Loans and Need to Get Out of Credit Card Debt. – Nancy

Steve Rhode — Thu, 11 Feb 2010 15:57:37 +0000

From How to Get Out of Debt

“Dear Steve,

I am a full time graduate student who works occassionally. Mainly, I live off my student loans. I have 23K in credit card debt and need to get out of it because I don’t have much money to work with.

I’m nervous about consolidating my credit cards because I heard that it doesn’t look good on your credit report if that is done. Is that true? Also, if I consolidate my credit cards will that hurt my chances of getting future student loans.

Nancy”

The Answer:

Dear Nancy,

When I read that you were living off of your student loans, I cringed. Student loans are almost one of the worst debts to have. If you default or fall behind on your student loan debts up to a 40% collection charge can be added, they can’t be discharged with bankruptcy, and even if you are dependent on public benefits to get by, those benefits can be garnished to pay the student loan.

I would suspect that your occasional work schedule, need or habit has lead to some of your $23,000 of credit card debt. While you might not be taking cash advances from the cards to get by, I would bet that many small expenses were charged to the cards to help make ends meet.

I am less concerned about how your credit report would look from going into a debt management program to consolidate your debt. If you are not working much then having $23,000 of credit card debt gives you a horrible debt to income ratio and that is already hurting your credit score.

I implore you to get a copy of this consolidated credit report and see what all the credit bureaus are saying about you right now. I think you’ll find that you score is low now but the good news is that the consolidated credit report I recommend will tell you the exact steps you will need to take to increase your credit score.

Nancy, please stop adding to the debt on your credit card. Please stop living off of the student loan money and you may have to adjust your workload so you can get by.

The last option to consider is for you to go and meet with a bankruptcy attorney for a free bankruptcy consultation and discuss discharging the $23,000 of credit card debt so you can focus on finishing your college education.

Big Hug!

@GetOutOfDebtGuy

My Husband Has Aggressive Advanced Cancer and Our Debt is Killing Us. – Gina

Steve Rhode — Thu, 11 Feb 2010 15:57:36 +0000

From How to Get Out of Debt

Gina

“Dear Steve,

We have a lot of debt and serious medical issues that are generating medical bills we won’t be able to pay.

We bought a new house 2 years ago and haven’t been able to sell the old house. It is rented for just enough to cover the first mortgage payment. We have a maxed out equity line on that house as well.

The new house is in a neighborhood in which the values have fallen some and there are many houses on the market that aren’t moving (NC).

We have $25,000 in student loans, $15,100 car loan, $58,000 in unsecured debt and a loan on the 401k of $7700.

We are paying everything on time but have no savings. My husband has very recently been diagnosed with an aggressive, advanced cancer and has just begun treatments.

We have health insurance but it is a high deductible plan with an HSA that we just started about a year ago so this first round of bills will wipe it out. The hospital that is doing the treatment is out of network so we will have to pay 50% after we meet the annual $12000 out of pocket maximum.

We have considered walking away from the mortgage and keeping other things current or just filing bankruptcy and trying to start over. Right now we make about $98000 annually but the loan on the 401k eats up $600 per month and we can not get them to let us discontinue the payroll deduction as some of the money is company contribution and they tell us that we can’t have access to that prior to age 55 except through the loan. We really don’t know what to do and the stress is awful.

Especially in light of dealing with my husband’s serious diagnosis.

Given our situation, what is our best course of action. Is there any legal way we can stop the payroll deductions so that we don’t have to file bankruptcy or lose the house?

Gina”

The Answer:

Dear Gina,

First off, my prayers and hopes go out to you and your husband to beat his cancer.

I am so sorry that you have to deal with the financial pain at a time of emotional and physical pain. Unfortunately, it is a situation faced by many.

Now my suggested course of action is from a holistic point of view and individually the parts might not seem sensical but as a whole I think they make sense.

You’ve said that your husband has advanced and aggressive cancer. Not that I know anything more about his medical condition, but for the sake of this discussion, while I hope that he has a full recovery, sadly I’m going to assume the worst.

If your husband were to pass away his payroll deduction for the loan would cease and the plan would be paid out.

Additionally, if he were to pass away, I suspect that you will have some amount of life insurance coming to you, either from an individual policy you may have or an employer sponsored group insurance policy.

Probably one of the most important areas to keep stable at this time, is the house in which you both currently live. I would image that not having to deal with moving right now, would be a blessing for the both of you.

My primary goal at this point is to set you up with a plan that will minimize the stress to help you to deal with the cancer, and to prepare you in the event that he were to pass away.

I think the most logical approach in that case is for you to seek legal protection under chapter 13 bankruptcy. Why a chapter 13? This should allow you to regroup your finances to what you can afford in the situation. It will also protect you from any collection activity at a time when you least need that stress.

But I think it is imperative that you immediately find a local bankruptcy attorney and discuss this situation openly and honestly from the point of view of the life you need to live under the circumstances you have. The attorney will see that with the massive out of network bills still coming that more debts will be piling up from that so a chapter 7 bankruptcy probably does not make sense right now. A good plan of action and coordination with your bankruptcy attorney is going to be just as important as good medical right now.

Using this approach you will also be able to stay in your house and keep your car so you can get back and forth for medical treatments.

You may want to think about handing the rental house back to the bank and including any debt from that in your bankruptcy.

His student loans will not extend past his death if they are government backed loans. In the meantime if he is totally or partially disabled you could apply for a discharge under that program. Here is the form.

In bankruptcy, any life insurance proceeds should not be attached by your creditors. If it does appear that your husband will regrettably pass away, then talk to the bankruptcy attorney about converting your chapter 13 bankruptcy to a chapter 7 bankruptcy at that time and include the remaining medical bills that can’t be paid.

I can only steer you based on what you’ve shared with me. I strongly suggest that you print out this question and answer, contact a local bankruptcy attorney, schedule a free appointment to go in and talk, and discuss this approach and your situation with the attorney.

I just want for you to understand, that bankruptcy in this situation is not a failure route. It is a route that will allow you to minimize your stress, get the most consumer protection, allow you to make your time left with your husband the best it can be emotionally and without the stress of this financial situation, and prepare you for debts to come.

Big Hug!

@GetOutOfDebtGuy

FAFSA Student Loan Scam to Avoid

Steve Rhode — Thu, 11 Feb 2010 15:42:18 +0000

From How to Get Out of Debt

This just out of Tennessee:

The state deadline for college financial aid is quickly approaching, and state officials are asking parents and students to beware of official-looking letters promising student financial aid information for a fee.

Attorney General Bob Cooper and Division of Consumer Affairs Director Mary Clement are urging Tennesseans to be wary of potential financial scams designed to steal personal information and/or cash. The alert is being issued because the state has learned that students and parents of university students have been receiving letters urging them to pay $50 or more to apply for financial aid. Tennesseans can get information free from the school’s financial aid office or online.

The letters often have government-like seals, personal information about where the student attends school, and warns of quickly approaching deadlines. Moreover, these are also being sent out while schools are working with students and families in establishing aid for the following academic year. The deadline to file the FAFSA (Free Application for Federal Student Aid) form to be eligible for the Tennessee Student Assistance Award (TSAA) is Feb. 15, 2010 and the deadline for Tennessee Hope Scholarships is September 1, 2010. For more information, visit the website at www.fafsa.ed.gov.

“These businesses send letters that appear as if they are affiliated with a university, when in fact they are not,” Attorney General Cooper said. “Companies like these are trying to gain a student’s or parent’s trust simply to make money for a service the parent or student can obtain for free.”

“We encourage students and parents to work closely with their universities’ financial aid offices and verify the source with the school before giving money or their personal information to anyone claiming to provide financial aid, funding or information about financial aid.” Director Clement said. “Students should never have to pay money to get a scholarship or information about financial aid.”

@GetOutOfDebtGuy

I Can’t Pay Sallie Mae – Carlos

Steve Rhode — Fri, 29 Jan 2010 20:24:38 +0000

From How to Get Out of Debt

Carlos

“Dear Steve,

Sallie Mae loaned me $10,537.50 on 08/31/1994. I started making payments on it in 2003. Have been in forbearance three times. I have already paid about $7,000 on this loan. he loan is on forbearance until 03/07/2009. Because of financial hardship I wanted to settle with Sallie Mae for $4,000. Total Principal to be paid $13,989.89, estimated interest to be paid during repayment $6,796.20. Estimated total I’ll be paying $20,786.09. PLEASE HELP!!!!

Here is the email I sent Sallie Mae on Monday:

To whom it may concern,
I have made my payments to date as best as I can. My loan is in forbearance until 03?07?2009. The company were I’m employed has had a 20? salary cut accross the board company wide. On top of that, it seems that the company might be closing real soon, it has already laid off 70? of the workforce. I feel that it’s just a matter of time before I’m let go. I would like to see if there is anyway possible for me settle on this loan for the amount of $4,000. This would be everything I have, but at least the debt will be paid off. Believe when I tell you, I have looked at every option to find the best way to settle this debt and not run the risk of defaulting on it in the future. I respectfully ask that you please consider my offer and let me know if this is feasible. Thank you in advance for your prompt attention to this matter – Best regards, Carlos

Here is their response which I received today:

DEAR CARLOS,

Thank you for your inquiry and for your business with Sallie Mae.

Sallie Mae does not negotiate reduced payment of your outstanding balance. If we may be of further assistance, please visit our Web site at www.salliemae.com.

Sincerely,
Customer Service

Is there any possible way to settle with Sallie Mae for less than the principal balance?

Carlos”

The Answer:

Dear Carlos,

Sallie Mae doesn’t need to settle on debt because they know that your obligation to them will survive even bankruptcy. Go bankrupt, they don’t care. They have all sorts of power. They can capture tax refunds, increase your balance by up to 40% as a penalty fee, and keep you treading water with no way to get out of debt.

Under § 523(a)(8) of the Bankruptcy Code, student loans are nondischargeable unless repayment of the loan would impose an undue hardship on the debtor. The burden of establishing undue hardship, by a preponderance of the evidence, is on the debtor. The Code contains no definition of the phrase “undue hardship” and interpretation of the concept has been left to the courts. In this Circuit, the applicable standard is the “totality of the circumstances” test as set forth in Andrews. In applying this approach, the courts are to consider: (1) the debtor’s past, current and reasonably reliable future financial resources; (2) the reasonable necessary living expenses of the debtor and the debtor’s dependents; and (3) and any other relevant facts and circumstances unique to the particular case.

The principal inquiry is to determine whether “the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt – while still allowing for a minimal standard of living”; if so, the indebtedness should not be discharged. Bankruptcy courts are required to analyze a debtor’s student loans, and make a determination of nondischargeability of them, on a loan-by-loan basis. There is no authority in this Circuit for discharging only a portion of a particular loan. – Marie vs Citibank

I think the email response you got from them is fairly typical and I am sadly not surprised by it at all, even though Sallie Mae says they will work out individual repayment plans.

Sallie Mae does not offer an Income Contingent Repayment Plan (ICRP) that would allow you to repay your student loans based on what you can reasonable afford to pay. Just recently a judge ruled that because Sallie Mae failed to offer an ICRP option that a student would be unable to repay her student loans without undue hardship and allowed the student to discharge some of her student loan debts in a Chapter 11 bankruptcy which follwed a chapter 7 bankruptcy to discharge all other available debts first.

I’m afraid the news isn’t sunshine and lollipops when it comes to student loan repayment difficulties. I’d suggest that you talk to Sallie Mae about negotiating a monthly repayment that you can afford and if you can’t afford anything then go and talk to a bankruptcy attorney about a potential discharge of your student loans in a Chapter 11 bankruptcy because they pose an undue financial burden on you.

Big Hug!

@GetOutOfDebtGuy

I Have U.S. Student Loans But I Now Live in the UK. – Ben

Steve Rhode — Wed, 20 Jan 2010 21:05:56 +0000

From How to Get Out of Debt

Ben

“Dear Steve,

I’ve been paying off my university loans while living in the UK for years, but not able to cover much more than the interest and so not getting anywhere very fast. I have just under $10,000 to pay. Since I am settled in the UK, what would the consequences be for not paying this debt at all? I suppose I’d be black listed on credit reports, but since I’m living in the UK, would that matter? I would like the option of returning to live in the US, so I guess I’m wondering for how long this would effect my credit in the US?

Ben”

The Answer:

Dear Ben,

At this time there is no cross reporting of debts from the U.S. to a UK credit report. On that front you’d be just fine.

The bigger problem is the mess that would be potentially waiting for you upon your return to the U.S. When I first moved to the UK I didn’t know when I’d return to the U.S. For me it took two years away and then spending 3 weeks driving across the U.S. to make me realize how much I missed home. The odds are pretty good that at one point you’d return.

But if you do, just keep in mind that at that point you might have to file bankruptcy to clean up the mess and huge balance that will have accrued through time and penalties. You can discharge student loans over a 7 year time limit.

The only other thing to watch for is that you are still required to file U.S. IRS tax returns. If your loans are government backed then any IRS refund you might be entitled to will be intercepted and sent to the loan servicer instead.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

I’m $850 in Debt, in College, and Don’t Want to Tell My Parents. – Jessica

Steve Rhode — Sat, 16 Jan 2010 19:57:04 +0000

From How to Get Out of Debt

“Dear Steve,

I am a college student with 2 years left of undergraduate school and then one more year for grad school. I got a credit card last summer and was doing fine until school started. I couldn’t find a job so my bill racked up to around $850.

I still am unable to find a job and I am struggling to afford the cost of food. Creditors have been calling me day and night. I’m scared that my credit will be messed up because of this or that creditors will file a lawsuit against me.

As of right now, I do not have any student loans but I have considered taking one out just to pay this debt. The problem with that is, I do not want my parents to know what a mess I have gotten myself into, and they would find out if I took out a student loan!

What are my best options?

Jessica”

The Answer:

Dear Jessica,

Taking out a student loan to pay this debt would be a massive and colossal mistake. It would be the worst thing you’ll ever do and if you do it I will personally come over and kick your ass. I hope I didn’t sugarcoat that too much for you.

Of all the solutions available to you, the best is to fall on the sword with mom and dad and fess up to the situation. You owe too little to be helped by credit counseling, budgeting isn’t going to save you since you have no income to budget, and as long as this issue remains open and unresolved it will hurt your credit.

I think you’ve learned about the dangers of debt when you can’t pay it and it is time to put this matter behind you with a little help of the Bank of Mom and Dad.

They may be upset for a short period of time but share with them what you have learned from the experience. Help them to see that this is the least expensive and most important class that you will learn in all your college years, Debt 101: The Consequences of Debt.

Big Hug!

@GetOutOfDebtGuy

I Went to College for a Bit and Now They Want Me to Pay. – Noname

Steve Rhode — Mon, 04 Jan 2010 19:32:45 +0000

From How to Get Out of Debt

Noname

“Dear Steve,

I singed a contract with my college to attend a semester tuition was 10 thousand dollars. I paid 3 thousand and stopped going to classes after that.

The college is insisting I pay the remainder 6 thousand dollars, I ignored there request and told them I never attended class. They said since i singed a contract saying I pay the tuition i was obligated to pay the remainder. Now I have collection call me everyday the balance has somehow jumped to 11 thousand dollars…I am 18 and don’t work live with my parents. My parents cannot pay this off..what are my options? I don’t want to involve my parents however i am a depended of them. I cant pay the money off my college wont corporate and help me and the money seems to grow by the day. It feels like i am drowning in a bag I want to go hide but problems doesn’t seem to disappear. Please help.

What are my options with out involving my parents even if i am a dependent. Can i file bankruptcy. I want to do something so this doesn’t hunt me when I am 35…

Noname”

The Answer:

Dear Noname,

You’re screwed on this debt. You will have to pay it. I’ve seen this happen to a lot of people. The only way a college will reduce the amount of your tuition is if you follow their withdrawal and refund policy. If you had notified them by X date that you were dropping out you would have only had to pay a percentage.

This sure sounds like a private student loan and thus can’t be discharged in bankruptcy but you could always go talk to a local bankruptcy attorney and have them review the situation.

And for all of us over 35, it’s not that old.

There is no need to involve your parents. It sounds like you were 18 when you signed the contract to pay for school. You were of legal age to enter a contract on your own. If you were not 18 when you signed the contract, you might have a loophole there.

I can appreciate how stressful and overwhelming the situation feels but it is most the fear of not knowing and not having a plan that creates those bad vibes. Once you talk to the local bankruptcy attorney you’ll know if there is the slightest chance of discharging this debt in bankruptcy, if not, looks like you’ll be working hard to pay it off.

Big Hug!

@GetOutOfDebtGuy

Pam Asks “Does a Deferred Student Loan Lower Your Credit Score”

Steve Rhode — Sun, 13 Dec 2009 21:22:00 +0000

From How to Get Out of Debt

“Dear Steve,

I have $40,000 in credit card debt but have never missed a payment.I am trying very hard to make more than the minimum payment. I have a long credit history with no late fees ever. My credit score is about 750. I have 3 kids in college and have outstanding deferred students loans that I have cosigned. I know this makes me responsible for these loans but I have no doubt that my son will pay them on time. At the present time they are all deferred.

Does a deferred student loan lower your credit score?

Pam”

The Answer:

Dear Pam,

The only reason I can see that these loans might lower your score would be that they represent a level of debt that you are responsible. I do not know of any scoring issue regarding the fact that they are deferred.

If you are worried that your score is lowered for a particular reason, it is easy to find out why. Simply order this consolidated credit report with the credit score and the report will tell you specifically why your score is what it is and what you can do to improve your score.

Once you order it you will be able to download your three bureau report online and within minutes you’ll have the answer from the very people that are scoring you.

Big Hug!

@GetOutOfDebtGuy

The Answer:

I Went to a Second-Hand College and I’m Deep in Student Loan Debt. – Amber

Steve Rhode — Sun, 13 Dec 2009 01:10:24 +0000

From How to Get Out of Debt

Amber

“Dear Steve,

In 1999 I went to a second-hand school that due to a family situation I was unable to finish. At the time I didn’t realize I was taking on a loan that was double the amount of my schooling.

I am now recently unemployed with 3 children and my loan is in default. A company called VanRu has purchased my loan and started garnishing my wages…When I called to make some kind of payment arrangements they wanted me to pay more than they were garnishing. They have since started taking my taxes and now I only owe $5500.00.

Do you know of any grant or program to help me get this paid off so I can get my credit in order and me and my new husband can move on.

Amber”

The Answer:

Dear Amber,

There is a technical term for your situation, it sucks. But the good news is that your student loan debt is a fraction of most people. Student loans are one of the nastiest types of debt you can owe. People always assume it is “good debt” and launch into school without truly knowing the consequences of not finishing. Unfortunately, now you do.

You could try to go for a chapter 11 bankruptcy and claim that the payment of the student loans creates an undue hardship. You’ll need to talk to a local bankruptcy attorney about that.

But it seems that a reasonable course to follow is for you and your new husband to do whatever you can to pay this balance off as quickly as possible. The sooner you pay it, the sooner you’ll be done with it and can move on. Get second jobs if you can and throw every extra dollar you can towards the debt.

It might as well feel like you owe a million dollars, and I know you want this pain to be gone as soon as possible but if you both just make this a priority and make it a project, I think you can power your way through this debt and be done with it.

I didn’t avoid your grant question, there are no grants available for this.

Big Hug!

@GetOutOfDebtGuy

I Thought My Student Loan Was Discharged in My Bankruptcy. Now They Say It Can’t Be and Want Their Money. – Joseph

Steve Rhode — Wed, 06 May 2009 17:04:05 +0000

From How to Get Out of Debt

Joseph

“Dear Steve,

Filed BK in Cali June 2006. EDUCAP loan (student) was included in BK. EDUCAP claims that said loan is NOT dischargeable. I’m concerned that they are accurate.

My original loan was for 18k (1800 went to them as a funding fee). I paid faithfully for about 6 months. My owed amount in default was 17,700 ish. In Nov 2008, I noticed this debt was still negatively reflecting on my credit report. I contacted EDUCAP myself and explained the discharge. After discussing this debt via phone and learning about debt not dischargeable I was told that the debt was so far past due that it was being handled by a collection agent (I had never been contacted since the BK). I contacted the company (in OH) and began working with them. After about a month a new collection atty contacted me from my home state (MD).

The debt now is being claimed as over $31,000! The only two options I am being given is Lump Sum within 30 days of $24,000 or 3k down and 275/mo on the remaining 28k+ at continued rate of 8% plus all fees continue until I am current on the debt (which states that I am behind by 7k to bring current).

Neither option seems optimal at this time. I am told they can sue me in judgement court and I am thinking that I may get a better deal from a judge.

My question is this: I am wiling and capable of pay this debt (I can not afford more than $400/mo) but I feel that the collection fees are very excessive since I was the one that went to them to settle.

If they want to pay a collection fee, they should pay me and I will charge $1.00! I want them to take me to court for a judgement and they don’t seem to anxious to do this. How can I force a court hearing for a judge ordered settlement? What can I expect from a Judge in this case? Will he/she slam me with the entire amount (31k – is almost double the original borrowed amount) and demand a lump sum payment?

Or is it more likely that given the economy and my willingness to settle, will my amount be reduced? I am trying to clean up my credit so what is the best option here? I know the BK will stay on my credit for another 8 years but my current score averages 617 with only this EDUCAP causing me to stay down. My fair scenario would be for me to give this company 3k down and pay 275 – 325/mo on a remaining amount of <19.5k. I also want them to remove all info of said debt from my credit report ONCE amount is paid in full! I don't feel that is a bad deal for all and yet this company seems hardcore in not settling at all.

Joseph"

The Answer:

Dear Joseph,

My first reaction is that the student loan discharge in bankruptcy was incorrect and it was not eligible for discharge. But before you or I make any assumptions, I think you need to go back and talk to the legal professional you hired to handle this matter for you. I suggest that you contact your bankruptcy attorney and discuss the matter with them.

As far as some of your other assumptions go, I’m afraid you are on the wrong track. If the matter goes to court for a judgment against you, the judge is not going to reduce the amount you owe. That amount will be determined by the balance, interest rate you agreed to, default charges, etc. that were part of the agreement you signed. The judge is there to decide the issue as a matter of law. And if the loan was not discharged in bankruptcy, and remains unpaid, then the contractual agreement is going to be the document for the court to reference. If the lender wins the judgment they could then go for a court order to garnish your wages or worse.

If, after talking to the bankruptcy attorney, you learn that the student loan debt was not discharged in your bankruptcy, the $3,000 down and $275 a month does not sound like a horrible arrangement. Interest will continue to be charged at the agreed rate of the settlement and there is no expectation that this account will be reported as anything other than its actual status. It should not be removed after it is paid off. Your credit report will reflect that at one time you were delinquent on this debt but the more time that passes from the point this matter is closed, the less of a factor it will have on your credit score.

Remember, the offer to settle is a compromise on their part. They are not required to settle and as long as this is a valid debt, they can pursue you for the rest of your natural life, even after the statue of limitations runs out to sue you.

Big Hug!

@GetOutOfDebtGuy

If I Knew Then, What I Know Now, I Would Have Run Screaming From Sallie Mae. – Rachel

Steve Rhode — Wed, 22 Apr 2009 15:51:48 +0000

From How to Get Out of Debt

“Dear Steve,

I have a loan through Sallie Mae that is the subject of many a sleepless night, and if I knew then what I know now, I would have run screaming and NEVER taken out this loan.

I graduated from a state university not quite a year ago and took out $42,000 to cover school, books, and living expenses. Because this was a second degree, I had to cover all the expenses myself.

Now that I’ve been out in the real world, I can’t find a job to save my life. With two Bachelor’s degrees, I can’t even get a job at Wal-Mart.

I recently called Sallie May to put my account back into forbearance (which I had done once before to the tune of $150). When I got an operator and told him the nature of my call, he immediately told me that Sallie Mae was no longer offering forbearance and that I needed to pay $400+ dollars to bring my account up to date.

As it stands now, I’m a substitute teacher. I make just a little over $10 an hour, but I don’t get paid on days when I don’t get called into work. $400 is about what I make in a month, and the summer is fast approaching. This guy on the phone was adamant that the reason I was upset was because I “wasn’t getting what [I] wanted” and was throwing a hissy fit. Furthermore, he kept reiterating that it’s not Sallie Mae’s fault that I can’t afford the $400 payment (because, I’m sure, the 9.25% interest rate has nothing to do with it…) and that by asking for anything less than $400 a month I was doing a disservice to myself since the interest would “just keep going up” (nice to know that Sallie Mae cares…).

When I once again explained to him that $400 is my monthly income, he asked me what I *would* be able to afford. When I told him that $150 a month would be manageable until I find steady employment, he laughed at me and told me not to bother! That $150 a month wouldn’t do me any good! The nearly $10K in *interest* that’s accrued since I graduated *less than a year ago* has been capitalized and added to the principal, so I now owe them $53K+! I don’t want to shirk my responsibility to repay my loan, but I’m staring a default right in the face.

Honestly, if I were teaching full time, $400 a month would not be impossible, but no one is willing to work with me until I get on my feet. Instead, I get threats and constant phone calls trying to bully me into payments I simply don’t have, and there’s no middle ground. Do I have any recourse or options at this point?

Rachel”

The Answer:

Dear Rachel,

You have unfortunately learned the hard way what I have been saying for years, student loans are minefields and not automatically “good debt.”

Sallie Mae is not what I would call, an accommodating lender. While they offer an “income-sensitive” repayment plan you must still make at least the monthly interest payment. In your case, I’m not sure if that is the $400 per month they keep throwing back in your face, but it sounds like it.

To repay your student loans in ten years your payment would have to be around $680 per month. Even if you just made the $400 monthly payment, you would not be reducing the amount you owe one penny.

Student loans also can’t be discharged in bankruptcy, with an exception, a Chapter 11 bankruptcy may discharge certain student loans in some cases.

The student loans have you boxed into a corner that can only be remedied with more income. You will have to do whatever you can to make money and pay the ^@(^#%#@ or face massive collection fees, wage garnishment, and worse.

The only solution I can think of is the student loan forgiveness program for teachers. But you would have to be a full-time teacher for five consecutive academic years in a “low-income” non-profit school, and then you could qualify for a federal loan forgiveness program.

Big Hug!

@GetOutOfDebtGuy

I’m Divorcing My Deadbeat Husband and He Wants Me to Pay His Student Loans. – Janet

Steve Rhode — Mon, 13 Apr 2009 21:44:10 +0000

From How to Get Out of Debt

“Dear Steve,

I am going through a divorce, and am drowning in debt. My “husband” was unemployed for 6 years, which caused me to borrow money to help the family survive. He graduted from school last year, and is currently unemployed and has decided (told me so) that I must be the one to pay for his Sallie Mae school loans, over $12,000 worth of it that i co-signed for anyways. I make $30,000 a year, but I have 2 children and a car loan and the other $12,000 loan as well as his school one, and many utilities that i had fallen behind in while he was living with us.

Is there any way at all for me to get absolved of having to pay the Sallie Mae loan?
I really don’t want to do a bankruptcy and lose my car just so I can afford to pay off my deadbeat husbands school loan while he sits somewhere doing nothing.

Please help!

Janet”

The Answer:

Dear Janet,

Wow, he’s really quite a loser. He makes mean look nice. And the worst part of this, he’s got you boxed into a corner with no way out.

I’m sure at one time you loved him but the time to have fixed this situation was when he would not get off his ass to help the family survive, years ago.

The instant you cosigned for the student loans you made yourself jointly liable for his loans. You could always not make any payments and let the student loan lender go after your deadbeat, soon to be ex. But if you guaranteed those loans they will soon turn and want to talk to you for repayment.

And now that you are on the loan, the lender is not going to want to let you off the hook.

Unfortunately I think that bankruptcy is probably the most reasonable solution. The car lender will probably let you reaffirm the loan and keep the car. You should talk to a local bankruptcy attorney about your situation and the total amount of debts that you owe. You’ve got to get yourself in a position to make those student loan repayments. They can’t be discharged in bankruptcy and you don’t want to let them rack up massive interest and penalties by letting them rot.

Moving forward Janet, make sure your loving ex-husband is on the hook for child support through the courts. If he does not pay, I want to see his ass in jail, and I’m a forgiving liberal. This man needs no more consideration and breaks from you. You’ve done enough and he’s done enough to you. Do not let him walk away from his responsibility for the children you had together.

You deserve an extra big hug.

Steve

Can I Legally Do Anything to Eliminate Some of My Crushing Student Loan Balance? – Mark

Steve Rhode — Sun, 29 Mar 2009 15:59:18 +0000

From How to Get Out of Debt

“Dear Steve,

I borrowed around fifteen thousand dollars at eight percent in federal student loans to help pay for college. Four thousand was unsubsidized. That was many years back. I have been working as a substitute teacher, but only earn barely enough to survive. Sometimes I don’t even get calls to work.

I have state unemployment insurance that helps me with a little money when I don’t get job assignments. I was never able to make adequate monthly payments that would have lowered the loan balance. Today the balance is fifty thousand and rapidly rising. I would like to be able to negotiate the balance down, due to economic hardship.

The IRS will compromise with people, but it seems that these loan people will not. It looks like I may never get out of this quicksand. I’ve already consolidated, and all of the deferment months allowed are about to expire.

Can I legally do anything to eliminate some of my crushing student loan balance?

Mark”

The Answer:

Dear Mark,

Student loans are pushed on students and most people assume them to be some sort of benevolent warm and fully loan. When you wind up in trouble, that is often not the case.

With up to a 40% addition to the amount of your loan for winding up in collection, the appropriation of tax refunds, and the garnishing of public benefits, you can’t brush off the student loan obligations.

Rather than go into all the options here again, see this previous question and answer, Tiffany is Behind in Student Loans, Late On Other Payments, And Looking For Hope. Additionally, check this article that includes information on the Teacher Loan Forgiveness Program – FFEL and Direct Loan Programs.

Steve

I Have Too Much Debt And I’m Going Back to School. – Ken

Steve Rhode — Thu, 12 Mar 2009 16:56:50 +0000

From How to Get Out of Debt

“Dear Steve,

Hello i have to much debt i am going back to school and need some relief i want to pay what i owe but i can’t make the payments

Is there a way to consolodate all my debt and lower my interest rate and how will this ffect my credit

Ken”

The Answer:

Dear Ken,

No, there is no magic cure for lowering your payments and interest rates.

I can’t imagine that heading back to school is such a great idea until you address your current situation. School will just add more debt to debt you already can’t pay.

People often justify that they need additional education to get a better job but what is going to happen to you if you don’t complete your studies and get your degree? I’ll tell you, you’ll just owe a bunch of student loan debt and this old debt will be in collections and trashing your credit report.

You have two real world solutions here. You can either not go back to school until you pay off your debt or you can go talk to a bankruptcy attorney and look into bankruptcy to discharge your debt before school.

You’ve got to take some action and change the course you are on right now, because this is a train wreck waiting to happen.

Big Hug!

@GetOutOfDebtGuy

I’m Drowning in Private Student Loans. – Kathy

Steve Rhode — Mon, 23 Feb 2009 17:21:23 +0000

From How to Get Out of Debt

Kathy

“Dear Steve,

I graduated from an affordable college four years ago with $70K in student debt. Because my parents made $200K per year, but were unwilling to help me pay for college, I was ineligible for sufficient Federal aid, even loans. I was forced to finance college through a private lender, which I was lead to believe adhered to the same rules as Federal loans. I was wrong.

Shortly before graduation and well before repayment, my 2-5% interest rates skyrocketed to 10-20%. I have faithfully made complete $800 payments on time every month since repayment began, a fact which forces me to live paycheck to paycheck on $40K per year, but I am not even covering the accrued monthly interest. The loan amount has grown to $104K.

I have little savings and my credit cards have now become a problem (nearing $10K) because any emergencies (car problems, vet bills, household repairs) cannot be covered in cash and I do not have the room in my monthly budget to pay off the cards, which was my ritual throughout college.

Due to to the current financial crisis, my credit card interest rate have jumped to 28% from the promotional 10%, which was supposed to be maintained as long as all payment were received on time. They were, by the way.

In spite of all this, I still maintain good, if overburdened, credit.

I feel completely hoodwinked by the system and my family, and intensely angry at myself for not being smarter. Due to exclusionary laws, no student debt can be discharged under ANY bankruptcy law.

The cherry on top is: I was just laid off. Thankfully, my savings and unemployment will suffice. All of my student loans are now in forbearance, but only for 3 months instead of the promised 12 months, just because they can.

I plan to be married next year. I want to start taking real strides to solving this problem so that my new, married life can be as close as possible to debt free.

Kathy”

The Answer:

Dear Kathy,

I’m afraid yours is yet another classic case of not all student loans are good loans. It bothers me terribly that young people start out life so burdened in debt. And one argument I often hear is that at least the student loans are being used to improve the person and get them a degree which will lead to higher earning potential. But only about 34% of students that start with loans ever complete their degrees.

Student loans are one of those things that we can no longer assume are good or worth taking out.

Congratulations on the upcoming wedding. You should not put off your plans because of the student loan debt. It’s going to be around for years to come, I’m afraid.

Up till this point your student loans have been marching backwards. Even in forbearance they continue to build up interest and that just leaves you with more to pay. Your best chance of digging yourself out of this hole is going to be to use the combined income of you and your new spouse. Hopefully you will then be able to pay a lot above the monthly interest charge and that will reduce the total amount that you owe.

Private student loans are not like federal loans. They have fewer options and seem to leave the borrowers in a real jam.

Your only real option would be to seek out a student loan consolidation loan with another private student loan lender. You could try the lenders below and see if they might be able to help.

Big Hug!

@GetOutOfDebtGuy

I Have AIDS and Disabled But I’m Afraid My SSDI Benefits Are Going to Get Garnished for Student Loan Payments. – Jack

Steve Rhode — Mon, 02 Feb 2009 15:40:46 +0000

From How to Get Out of Debt

“Dear Steve,

I have AIDS and can no longer work I owe around $12,000.00 in current and way past due credit card debt. I am on SSDI and can barely pay rent+utilities. I have fought off Capital One and now I hear the feds can garnish my SSDI $$ for student loans. I think I should change phone numbers and quit paying all of it so I can eat and stay warm.

If I just stop paying all the credit cards and change my phone number can the CC co. take my benefits?

Jack”

The Answer:

Dear Jack,

Your question is a good one. I had to spend some time looking into it. Probably like a lot of other people I assumed that if you were eligible for Social Security Disability Income (SSDI) that the government would not garnish the very money they gave you to get by for your disability. I was wrong.

Apparently, even though you have been classified as disabled you are still going to have to deal head-on with the Department of Education on your student loan situation. Simply stopping payments or hiding is not going to be the smart way to deal with this.

I found some good information on a Neighborhood Legal Services site.

I have a disability. Can my student loan be forgiven?

It depends. The Department of Education has very high standards for what is considered a disability. Even if you qualify for SSI or SSD, you are not automatically eligible to have your loans discharged.

What is the Department of Education’s standard?

In order for your loan to be forgiven, you must be totally disabled, and the injury or illness must be expected to continue indefinitely or result in death. Even if your condition prevents you from working in your chosen field, you are not considered permanently and totally disabled so long as you can attend school, earn money, or get another job somewhere.

If you were disabled when you took out the loans, your condition must have deteriorated substantially, rendering you permanently and totally disabled.

What if they do find me totally and permanently disabled?

If they decide to forgive your loans, there is some good news for you. Not only do they cancel the unpaid balance and interest of Defense, Direct, and Perkins Loans, but the cancellation applies retroactively, as well. The lender has to return any payments that you made after the date you became certifiably permanently and totally disabled.

The process for making your application to forgive, discharge, or eliminate your student loan obligation to avoid SSDI garnishment is fairly easy.

If you believe you qualify for a disability discharge, you and your doctor must complete, and sign, a discharge application form. You can request this form from the party that holds your loan, or you can download it now. Check a recent demand letter or bill for this loan; if the address to which you are requested to send payment is the National Payment Center in Greenville, TX, you should submit your completed form to:

U.S. Department of Education
P.O. Box 5609
Greenville, Texas 75403-5609

You may request a copy of the discharge application form by calling 1-800-621-3115. Note: in order to guard against fraud, the U.S. Department of Education (Department) will contact your doctor directly to confirm the nature and severity of your disability if you apply for a disability discharge.

To deal with your credit card debt, the best course of action is going to be to legally discharge that debt through bankruptcy. Click here for a free bankruptcy consultation with a local bankruptcy attorney.

Big Hug!

@GetOutOfDebtGuy

Rebecca the Nurse Wants to Get Her Student Loans Off Life Support

Steve Rhode — Wed, 17 Dec 2008 20:19:21 +0000

From How to Get Out of Debt

“Dear Steve,

Student loans private 30,000 at 10% with five separate loan groups/amounts refuse to consolidate and lose control of options. Federal two groups one at 27,000 the other 29,000 both at 5.75%. 39 years old and have been working as a nurse for 1 year making at this time $62,000. I want to attack my sallie mae loans!

I’m highly motivated to make great sacrifices in a monthly budget so ask to ask my above mentioned loan. How do I formulate a strategic plan to pay off this debt wisely? How do I best access up to date information regarding the student loan industry itself along with my consumer rights?
Rebecca”

The Answer:

Dear Rebecca,

Unfortunately your private student loans have fewer options. While those student loans are protected from discharge in bankruptcy, there is no requirement that the lenders doing anything to assist you at all.

The good news is that there are options regarding your Sallie Mae loans and the Sallie Mae website is an excellent source of repayment options available to you.

Standard Repayment

The standard repayment plan offers the lowest overall cost. When you start repaying, your loans are automatically placed into this plan. Your monthly payment amount remains the same over the term of the loan.

Use Sallie Mae’s monthly loan payment calculator to see how this plan might work for you.

Extended Repayment

Lower your monthly payment without the inconvenience of applying for a new loan. Plus you can prepay your loan(s) at any time without penalty. If you have more than $30,000 in federal student loans, this option may be the best choice for you.

Graduated Repayment

With graduated repayment, your monthly payments are lower at the beginning of repayment and increase over the term of the loan.
You can choose to make payments as low as interest-only for up to four years. Payments for the remaining term will then be higher.

Income-Sensitive Repayment

Your payments are based on a percentage of your monthly income — from 4% to 25% — as long as you pay at least the interest that accrues every month.

If You Are Currently Repaying Your Loans

If you are currently repaying your loans you can login and find out what your Sallie Mae options will be by going to ManageYourLoans.com.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Alex is Buried in Student Loan Payments

Steve Rhode — Thu, 04 Dec 2008 20:22:46 +0000

From How to Get Out of Debt

“Dear Steve,

I have Federal Student loans dating back to ’94/95. My situation was unusual. I first attended MBA school and left after a semester because I also got accepted to Law School at a different university. I went to Law School for a year and a half only to realize it wasn’t what I wanted to do so I left. I returned to MBA school and all the while I had been using student loans for both business school and my short term in Law school.

When I graduated from MBA school, I deferred my student loand until I could afford to make my monthly payments. I have deferred and used forbearance until today. I have no deferment elegibility left so I have to forbear. Unfortunately, the $680 monthly payment is too much for me to pay. I now owe approximately $108,000 in student loans. :-( I need help on how to takle this. I cannot afford that payment because I have a mortgage and other monthly bills. What can I do? I would greatly appreciate your insight and guidance.

Sinking deeper into student loan debts,

Alex”

The Answer:

Dear Alex,

I worry more and more about student loans as the years go by. It used to be that college was the preferred route to take to provide you with the skills necessary for a richer future, in many ways. But now, college loans are getting to be so expensive and such a noose around the neck of students, especially those like you that seek advanced degrees, that I’m no longer as supportive.

The graphic above is from a great New York Times article, “College May Become Unaffordable for Most in U.S.” that everyone should read. It challenges our old assumptions that college is within reach of young students now.

As I write this, your student loans are already 13 years old and you really have not even begun to start to repay them. This is a horrible problem. But your story is not unheard of. I’ve met many people that began law school, only to realize that it was not something that they wanted to do and so they quit or switched focus. Unfortunately that does not relieve you of your obligation to repay loans used for studies.

Since your student loans are not eligible for discharge in bankruptcy, you’ve really got one option, make suitable repayment arrangements. The ICRP (Income Contingent Repayment Plan) plan is probably going to be your best opportunity. See “Tiffany is Behind in Student Loans, Late On Other Payments, And Looking For Hope” for a more in-depth look at student loan repayment options.

Steve

The Answer:

Jake Wants His Transcript But He Defaulted On His Student Loan Debt

Steve Rhode — Thu, 20 Nov 2008 20:20:03 +0000

From How to Get Out of Debt

“Dear Steve,

I currently owe $30,000 directly to a university as a collection with 6% interest. They will not release my transcripts from my one year of study at the university until I have paid the amount in full. I am making the minimum payment every month, but my income is roughly $12-13 an hour because all I have is my high school diploma. The interest keeps accruing and I am unable to pay it off in the foreseeable future on my income. I would like to go back to school or complete some sort of training program to obtain a higher paying job, but cannot do so without my undergraduate transcripts.

How can I pay off the university in order to get my transcripts and obtain training to get a higher paying job?

Jake”

The Answer:

Dear Jake,

The college is holding the transcript hostage because it is the only collateral they’ve got. It certainly does not sound like this was a government backed student loan so your options are significantly limited.

Sometimes debt is just the beginning of their woes. Students who leave school because they can’t pay their bills often face a second sanction — a freeze on their education. Universities typically refuse to release transcripts for students who owe money, preventing those who’ve dropped out from finishing school elsewhere, which would better position them to repay the debt. Source

Over the years I’ve had a number of clients that have been in this very situation and until the debt is paid, the transcript remains a hostage.

Typically the issue surrounds your college regulations or student contract which says that all outstanding fees must be paid to receive course credit and official transcripts.

Your best course of action would be to attempt to negotiate a suitable solution with the university or hire a lawyer to look into the issue to determine if the college has violated the student contract in any way that may allow you to get an official transcript.

This is not necessarily a great solution but then again, I’m not a huge fan of student loans because the consequences for nonpayment can be very severe, as you’ve learned.

Big Hug!

@GetOutOfDebtGuy

The Answer:

C Wants to Defer Student Loans Without Hurting the Credit Report

Steve Rhode — Wed, 19 Nov 2008 17:15:00 +0000

From How to Get Out of Debt

“Dear Steve,

I paid my way through college and fortunately could afford to take out only subsidized Stafford loans amounting to $10,000. After graduating I planned to find a full time job but have only found part time temporary jobs. I clustered these jobs over the last eight months and have been able to pay down my debt to about $7,500. Unfortunately my temporary jobs have run out and I am currently applying for work. I received my final pay check one week ago and have a dozen applications pending. The job hunt and hiring process can be lengthy and I don’t want to spend money on my monthly loans payments.

If I defer my loans until I get another job how will that effect my credit score?

C”

The Answer:

Dear C,

Do you know my good friends A and B?

See my answer to Pam Asks “Does a Deferred Student Loan Lower Your Credit Score” for additional information.

Bottom line, a deferment still lets interest build up but does not put the loan into default. So a deferment would be better than not in lean times.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Pam Is Out Of Cash And Out Of Time

Steve Rhode — Sun, 12 Oct 2008 03:09:34 +0000

From How to Get Out of Debt

“Dear Steve,

I am no longer making ends meet. I have my daughters Sallie Mae $20,000 loan payments starting in one month, I can only afford to put little bits of gas in my car at a time, I have a $5,000 car loan and about $12,000 in credit cards.

I have not bought anything that I did not need only used my credit to make ends meet and now I have no more credit. I’m hanging on to a 700 credit score and wonder if theres any use to even worry about keeping my score since the market is crashing and the FEDS are ruining our economy.

I make $45,000 per year and am a single mom with two daughters Should I stop paying my credit card bills and use that money to live off of?

Pam”

The Answer:

Dear Pam,

Often times the hardest thing to admit that a moment of change has been reached and now is the time for radical or bold action.

From what you so kindly shared with me it is apparent that continuing the path of yesterday will not work for you tomorrow. You have student loan payments getting ready to kick in and you are all ready maxed out.

It does not sound like there is any reasonable expectation that your income is suddenly going to increase and allow you to pay both the student loan and the credit card debt.

I would suggest that you only make payments on the credit cards if you can afford them after all your other expenses. You don’t need to file bankruptcy right now but it is probably in your future if things don’t change.

While you can’t discharge or get rid of the student loan in bankruptcy, you can contact the Department of Education and see about getting on an ICR plan to pay what you can afford. See this previous answer for more information on that.

It is unfortunate that you have found yourself in your current situation but I think most people would recognize that when you are in a situation where you can only put a little bit of gas in your car at a time, that things are pretty severe.

I would not suggest that you enter a debt management or credit counseling program. That is not going to help you as tight as your finances are. The best way out of your current situation is to increase your income or reduce your expenses. And with your budget already trimmed to the bone, getting into the Department of Education ICR plan for the student loans and discharging your credit card debt is probably the best approach at the moment.

It would also be a good time for you to explain the reality of your situation to the kids and ask them how they can help in this difficult time. Maybe your daughter, with the student loan, can contribute some money each month towards the loan.

The reason I think that is important is that it sounds like you are living month-to-month and all it is going to take, even with bankruptcy, will be one unexpected and unaffordable expense and being homeless won’t be that far off.

The thing I’m least worried about is your credit score. Take your eye off your credit score right now and find a way to live within your income without resorting to credit. And every extra dollar you can manage to save, put it in a savings account for unforeseen expenses.

I’m worried about you. Be safe.

Big Hug!

@GetOutOfDebtGuy

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