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Everyone Lovingly Helped Me Get Buried in Private Student Loans I Can’t Afford

By on July 6, 2017

Question

Dear Steve,

I am over $100,000 in debt for a Bachelor’s of Science in Fashion Design from a small state school in Indiana. My mom has been depositing enough money in my account to cover the private and federal loan payments since I graduated but she needs to start saving for retirement so I need to figure out what my options are. Also, all of my loans have various grandparents as cosigners and are from different banks. I have a lot of shame and feel stupid but I also feel I was duped. The university financial aid office refused to answer my questions about private student loans and being a the only person I knew who had ever gone to college, there was nobody to help me. In the past looking into options like bankruptcy and consolidation has left me feeling helpless but it’s time to do something.

Am I right in assuming bankruptcy is a long shot since I’ve been making the payments for a couple years now and went to an accredited university? The program I did was in no way competitive with other fashion programs and did not teach the skills needed to obtain the highest paying jobs in fashion such as technical design, creative direction, and branding so could that help my case?

I have a car payment and have no intentions of buying a house so defaulting doesn’t sound horrible but how does that effect my cosigners who are all retired and on fixed income? Will they be able to garnish my wages?

Is consolidating my student loan debt a possibility? What are the options for that?

Alyssa

Answer

Dear Alyssa,

I wish there was a wonderful solution, but honestly there’s not.

Everyone in this situation has tried to do the right thing. You pursued a higher education, your Mom helped with payments, and your grandparents pledged their finances to help you get the loans.

The issues that really complicates this situation is the fact your grandparents cosigned the loans. When someone cosigns they are not just helping you to get the loan but guaranteeing the loan in case you can’t make the payments.

I’m not even going to wade into the promised education provided by the school or the debt enabling by the financial aid office. I mean, who do the financial aid people serve; the school or the student?

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The situation is not hopeless but it is also not going to be easy to deal with without some pain.

In the face of utter hopelessness one option is to default on the student loans and hope to negotiate a better repayment scenario. See Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan. What complicates your situation is the number of different banks in the mix.

The most difficult issue here is going to be getting you and your cosigners on the same page with a common approach. Your grandparents my be what is called “judgment proof” meaning they could be sued over the defaulted student loans but have no assets for the banks to legally go after. But that requires legal advice and for that there is no substitute for seeking help from a lawyer licensed in your state. You might want to look at My List of Student Loan Attorneys You Should Consider for Assistance.

Remember that because a solution is difficult does not mean it is impossible. And you will need to do something because this situation is not going to get better all by itself unless you suddenly find a way to increase your income to a level where you can afford all of the student loan payments.

You can always look at consolidating your private student loan payments through a company like SoFi or Credible.

However, when it comes to the federal student loans I would suggest you not roll those into a new private consolidation loan. If you do you will lose the possible federal loan benefits you have access to like an income driven repayment plan. Conforming federal student loan payments can be as low as $0 per month in those plans. The option of which plan to select can be confusing so if you need help you can talk to an expert like my friend Damon Day.

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Just consider this the first day in the journey to dealing with your loans in a constructive way and with purpose. The goal will be to get your loans resolved one way or another so you can afford to live now, save for your future retirement, and develop a good financial foundation for today.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

One Comment

  1. Alyssa

    July 6, 2017 at 11:51 am

    Question asked.

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