Income Based Repayment

Navient is So Unfair

Written by Steve Rhode

Question:

Dear Steve,

In 1995 I took out a loan at Devry. 17,000 of unsubsidized and 17,000 of subsidized totalling 34,000 dollars. After Y2K companies didn’t need as many programmers as they suspected, which left me high and dry. I just couldn’t afford to pay down my load with Sallie Mae being unemployed. Plus, Sallie Mae during that time didn’t allow me to pay toward my principal, stating that my interest on the loans are capitalized…so they stated that if I combined these loans, the options would be more favorable. Sallie Mae loan was purchased from 3 separate companies leaving my head spinning.

Here I am now…with the third company (Navient)…who purchased the loan from the prior companies…further increasing my debt and my inability to pay. I am now at 91,000 dollars in debt.

I’ve tried reaching out to these companies in the past. I wrote letters to the President asking for forgiveness. I’ve called the Dept of Education…no response. Finally, I spoke again with Navient, and negotiated an amount that was plausible through an ‘IBR’ Income Based Payment plan.

Every year the IBR plan changes…based on my income. The unfortunate circumstance is my INABILITY to pay a higher amounts from year to year on an IBR, based on a 3% increase from year to year on merit increases.

I’m on my 4th year of the IBR, and after 20 years…the loan is forgiven. These IBRs do not take in consideration other outstanding bills, only what I make which isn’t favored for my inability to pay. Now they (Navient) wants $1200 per month as opposed to 250/per month from last year! This amount is a hell of a difference. What can I do?

Secondly, there has to be a law against price gouging. Collecting on a loan that was originally 34,000…to now owe 91,000 + interest. I’ll NEVER be able to afford this loan…nor do I have a job that would sustain my ability to pay such a ridiculous amount.

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Howard

Answer:

Dear Howard,

When it comes to figuring out what the right payment is, this official payment calculator will give you good answers. This is a good way to find out what reality is. Don’t be shocked but servicers sometimes don’t have a clue what they are talking about.

I feel your pain and completely sympathize. Student loans are such a racket. They hand them out like candy and leave people trapped.

At least you have federal loans with some options. People with private loans are really stuck.

The apparent goal of the IBR is not to get you out of debt but to make the payment politically small enough.

As it stands now, even if your loans are ultimately forgiven at 20 years, you may owe income tax on the forgiven amount.

When it comes to federal loans, if you don’t make at least the income-driven repayment and you default, the balances will be inflated even more and your Social Security checks will be garnished.

When it comes to income available for repayment, the Department of Education is a bit like the IRS, they don’t make allowances for what you do spend.

Where this all gets to be more like an art than a science is when you can find someone talented, like my friend Damon Day who can help you create a custom plan across various solutions.

Just enrolling in the IBR might not be your best bet. Some considerations are how long it will be till you retire, if other programs are better based on your marital status, or more technical issues.

If you thought working with a servicer is confusing or complicated, try double-checking the advice they give to see if it is really in your best interest.

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About the author

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.

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