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I’m in a Debt Despair Over My Navient Student Loans and Need Advice

By on July 26, 2017

Question:

Dear Steve,

I recently discovered that my private student loan monthly payment increased by $150, from $330 a month to $450 a month. That’s about 40% of my monthly payment after taxes! I am freaking out, I can’t afford it! I have a master’s degree and I work at a nonprofit and living below the average median income in Seattle. I also have federal student loan payments and credit card payments to make, in addition to the expensive cost of living in Seattle!

I finished my undergraduate studies in 2005 with an original balance of $32,781 for private student loans, across 6 different types of loans, with variable rates ranging from 5.25% to 9.25%. At this time, Sallie Mae was my lender (who is now Navient). Fast forward to July 2017, and my balance with interest ballooned up to $57475, with minimum monthly payment of $450.

I needed financial assistance to continue to undergraduate studies. I went to Seattle University, a private jesuit school, from 2001- 2005. I come from a very low income background, and my mom could not support me, and I heavily depended on scholarships and federal student loans to finance my education.

The Summer of my sophomore year, (i.e. June 2013) they had to close school and could afford to fly back home to spend my summer with my mom. I only had one option in order for me to stay in the dorms, which is to attend summer school. I couldn’t take out federal loans for the summer quarters so I took out private student loans through the school’s financial aid. I did this during my junior year too.

I finished my undergraduate studies in 2005 with an original balance of $32,781 for private student loans, across 6 different types of loans, with variable rates ranging from 5.25% to 9.25%. At this time, Sallie Mae was my lender. I started to pay my private student loan payments after my 6 month grace period. I remember paying about $450 a month starting Jan. 2006. I kept continuing to pay every month for several years. It was a struggle to pay this chunk of my disposable income into my private student loans. I started to hate the system that I’ve put myself in.

Around July 2009, I was laid off from my last corporate job also influenced by the great recession. I was jobless. I think this was the time when Sallie Mae had split off into Navient. I called navient to let them know that I am unemployed and they put me in forbearance. I think it was limited to a year.

Having no job prospects, I decided to go to graduate school in 2010. My forbearance with Navient had ended. I had to restart making private student loan payments. At this point, I told navient that I’m still jobless, I’m in graduate school, and I can’t afford to make any private student loan payments. They would assist me in this, and they told me that I have already used up all the assistance they can offer me (i.e. the 1 year forbearance). So they offered me an “Extended Repayment – Principal and Interest” With this, I had to pay $325 monthly private student loan payments and it increases with time.

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I used up whatever I had left from my Federal Student loan to account for this $325 monthly private student loan payment. I didn’t want to default and wanted to pay this down so I kept paying this $325 a month. I finished graduate school in 2013, got a full-time job that paid $33K/year, and I still continued to pay $325.

In June 2016, I was laid off from my nonprofit gig and my only source of income is unemployment which barely pays for my bills, let alone rent. Credit card debt was piling. I called Navient if they can assist me since I was on unemployment. Again, they told me that I used up all the assistance they can provide me, the forbearance that they provided me back in 2009. Thinking I was out of options, I continued to pay my $325 a month private student loan payments.

I luckily have a full-time job, but I’m still not making ends meet. I have high credit card balances as a result of my unemployment, and I’m really trying to pay it down, but with Seattle’s cost of living and my meager nonprofit salary, I am literally living paycheck after paycheck. I love working in community and having a meaningful career, but I’m constantly financially struggling. I just wish all this financial headache will just go away!!

I’ve been reading about the lawsuits that Navient is experiencing. I also read an article from your blog, CFPB, and other sources to stop making my private student loan payments, which is $450 a month, which is 35% of my monthly paycheck after tax. I feel like I’ve been screwed by the financial system for wanting an education, and I want my private student loans to at least be reduced, if not go away!! I want to take advantage of what’s currently going on with Navient and with the lawsuits, but I want to be sure that I’m protected and I’m following the right steps.

Question is: what should be my first step in making this happen? Should I reach out to Navient to see what options they have? Should I hire a debt lawyer even though I can’t afford one? I’m in despair and I’d really appreciate your help!

Raj

Answer:

Dear Raj,

The first step here is to take a deep breath. I sense you are accelerating towards panic here and it is entirely understandable since this is all personal to you.

As I see it there are several steps to take.

First, you want to make sure your federal loans are in an income driven repayment program. If you have not done so yet I would suggest consolidating your federal loans into a new Direct Loan and electing the IBR or PAYE repayment options and then make sure if you get married that you file your taxes as married but separate. That way only your income will count towards the payment. Your payment can be as low as $0 per month and yet keep you current.

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To better understand which repayment option gives you the better payment, use the online repayment estimator based on your specific loans.

Since you are working for a non-profit you should absolutely work towards forgiveness of your federal student loans through the Public Service Loan Forgiveness program. After 120 on-time payments of as little as $0 per month the result of your loan balance may be forgiven tax-free. Just make sure you complete the Employment Certification Form at least annually and keep any response back regarding your employment status in a safe place. Don’t lose it!

On the private loan front the fact you put the loans in forbearance feels like a blessing at the time but it just explodes the balances. It leaves you owing more that is unaffordable.

While you could go with a private loan default strategy, you also have all that unmanageable credit card debt.

Besides just limping along the way you are, you have two logical options from my point of view.

Option 1: You could file bankruptcy and discharge all your credit card debt in about 90 days. This would free up room to make your private student loan payment. Get your student loans on a standard repayment plan and not interest only of forbearance. Let’s knock them out.

Option 2: You could default on both your credit card debt and private student loans and weather the collection storm. Once the statute of limitations expired in your state you could file bankruptcy on all the debt, discharge it, and get the legal fresh start you are entitled to. This is a longer term strategy and it will take years to let the Statute of Limitations runs. It also depends on what state you live in for how long they are. In the State of Washington it looks like they are six years. However, you would need to speak to an attorney who is licensed in your state to confirm that approach.

At this point Option 1 seems like the more logical choice.

Post any updates or additional questions you might have for me in the comments section below.

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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. Raj

    July 26, 2017 at 11:32 am

    Question asked on eliminating Navient private student loans.

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