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My Student Loan Debt Collector Won’t Listen to What I Can Afford to Pay

“Dear Steve,

– I graduated college in 2009 after using what seems to be 5 different loan companies; sallie mae, chase, AES and two I can’t even remember. I have spent the last few years digging myself out of credit card debt holes due to not finding a job for almost a year after graduation. All my credit cards are closed and I am in the process of paying them off. My plan was to pay higher payments for a couple years, get rid of them completely, freeing up money to satisfy these student loans.

– I have been paying consistently on three loans from American Education Services (very small $25 a mon) and the other small companies ($130/mo to a creditor and to ECMC $200/mo).

– Chase (about 9,500 owed) and Sallie Mae (about 67,000 owed) are after me for much larger amounts. They both have sent my loans to different collection agencies. I find it confusing to know who has what loan and even what I can do about them.

– I work at a high school on a 9 month contract and the collection agency for the sallie mae loan just called me wanting to lock me into payments. I would not agree because I do not have steady income over the summer months and usually have trouble paying my regular bills. I have no budging room June-Sept. The debt collector wanted to know how I planned to pay for my other debt if I was telling him I had no money to begin payments with them. I didn’t know I had to go into all my personal information and explain things that I don’t even have an answer to right now.

-The reason I haven’t paid sallie mae is because they want almost 400 a month. That wont fit in my budget. I take home about $1850/month plus an additional $500 in private tutoring.
I pay out:
– 370-car
– 350- rent
– 200- ECMC
– 130- another loan creditor
– about 250 in total credit cards
– 70 for phone
– 112 for insurance
– 250 on food/gas
that puts me pretty close to 1800 so I just (in the last 2 months) started to put a little money aside for use over the summer. If I add sallie mae and chase in the fall I could probably give each 150 bucks. However, I’d need a raise and more private tutor clients to save any money.

Thank you for reading this and offering your advice to so many. My questions are regarding student loans; defaulted sallie mae loans specifically. I’m 33 and I live in California.

1. Can I ask to deal with sallie mae instead of the debt collector? I get written material from both. I also read that I can request to only deal with a company in writing. Which is for my protection- for a paper trail as well as reducing heart palpitations because of having to deal with pushy people over the phone :(

2. How much do I need to reveal to debt collectors about my life/financial situation? In my written response to sallie mae, I’d like to include a run down of my bills and income. The income will not be the same for the months I am out of work.

3. I told the sallie mae debt collector that I want to set up payments to begin in September when I return to work but he did not want to go with that, stating that I haven’t paid in the past. Situations change and I’ll be making more money starting then. Are debt collectors or Sallie Mae willing to arrange this type of agreement for defaulted loans? I really want to make payments but will still not be able to afford 400/a month. How do I get them to work with my terms?

Thank you so much for your time and advice. I really appreciate it!

-Ms. B.

Dear Ms. B.,

terrifying manI wish you had come to me a few years ago. The most logical approach is a chapter 7 bankruptcy to discharge your other debt in less than 90 days so you can get back to focusing on your student loan payments.

Dealing with student loans is actually a fairly straight forward approach. Read The Ultimate Guide to Dealing With Student Loans You Can’t Afford. If any of your loans are subsidized then they might qualify for an income based repayment program from the Department of Education. Additionally your subsidized loans would most likely qualify for forgiveness in 10 years under the Public Service Loan Forgiveness program.

Unsubsidized loans / private student loans have no required flexibility and don’t have to offer any concessions or affordable payments. If you can’t pay, each month, what they require they can sue you and garnish your wages.

The debt collector is not interested in logic or your math. They have guidelines they must collect under and are contracted to do so.

You could certainly request they communicate in writing but there is nothing that would require them to do so. If you cut off communication it’s just an invitation to dump you in the “to sue” hopper since you no longer neatly fit their process.

Another option is a chapter 13 bankruptcy that would give you a payment you could afford and legally stop all collection calls. The chapter 13 would most likely last for five years but would not discharge your private student loans. It would however buy you some time and peace while we wait and hope that Congress will change the laws back to make private student loans dischargeable in bankruptcy as they were before 2005.

We need a solution here and not a Band-Aid. Making partial payments doesn’t stop anything and not being able to afford the payment is not a defense when it comes to owing private student loans.

Without Congress changing the laws and requiring private lenders to offer income based payments the only way you can force the lenders to do anything is by either discharging your other debt and making enough room to make the full payments or filing a chapter 13 bankruptcy.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

I wish I had better news for you but it is what it is.

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

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About Steve Rhode

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.
  • Not telling you …

    Leave America. That is what I am doing. I can’t pay back my law school debt, so I am becoming an expatriate. You can make alot more money offshore and not have to pay the debt back. Or, I contacted some Soviet and Chinese companies who pay excellently for an American with technical skills and government experience. Sorry, I tried, but I just can’t take it anymore.

    • Steve Rhode

      Why not just use the power of the law and file a chapter 13 bankruptcy to protect you for the next five years while we wait for Congress to hopefully change the laws on student loans?

  • Meghann Austin

    Oops. I posted this in the wrong spot. Ms. B my suggestion is to sell the car that is causing a $370 payment. Buy a reliable A to B car for $2000 and use that extra money towards what is needed. Dave Ramsey has some good budget books that may also help you.

  • Jen

    I usually enjoy your articles, but I’m a bit puzzled here. If she has overwhelming debt that she has a plan to pay off and can foresee it, even within a couple of years, shouldn’t she be entitled to a forbearance (with interest) or deferment (no interest) ? Both pause the loan payments for a certain amount of time to let the person get on their feet. Considering her numbers, she should be able to submit a mandatory forbearance. I understand getting rid of that debt is paramount, but if she’s closing in on getting rid of some credit debt, hitting the pause button on the loans might be the best move. She could also still pay on her student loans while they’re in deferment or forbearance. Many do this when they just get out of college and it enables them to get secured in a job before taking on the additional payments. Realistically, she doesn’t have a huge amount of debt, but she does need an opportunity to get on her feet. Also, the Public Service Loan Forgiveness program is after 120 payments of working continuously in public service. There’s also the Teacher Loan Forgiveness program which would get a big chunk of her loans forgiven and enable her to pay them off in five years. Also, she can be on the income based payment program while working toward those 5 years. I’m not saying the loan system isn’t absurd, but I think in this case she should explore her options.

    • Steve Rhode

      Not all deferment plans are interest free. In fact federal loans where no additional interest is added are not interest free, the government pays the interest for some loans in deferment.

      “The government does not pay the interest on your unsubsidized loans (or on any PLUS loans). You are responsible for paying the interest that accrues (accumulates) during the deferment period, but your payment is not due during the deferment period. If you don’t pay the interest on your loan during deferment, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.”

      The issue here is one of cash flow. My mother was a teacher and we had lots of teacher friends. The summer off creates a very tough period for teachers who do not get paid year round.

      At this point, she has only begun to start to save some money to get her through the summer and certainly not enough to get by. I’m concerned about how she’s going to just make it through the next few months let alone get an affordable plan for next year.

      Even with a chapter 7 bankruptcy she’d most likely knock out $380 a month to use towards student loan payments and potentially even an additional $482 a month if she turned in the car and bought a beater to drive till she got back on her feet. Obviously she’d have the new smaller car payment.

      I think you might have overlooked that the Public Service Loan Forgiveness program is not for private student loans. And the Teacher Loan Forgiveness program might apply if the loans are “Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans”. In that case there are some very specific requirements that must be met before eligibility. If someone meets all the qualifications then up to $17,500 of qualifying student loans would be forgiven after meeting the five-year teaching requirement.

      If these loans are private student loans then none of those forgiveness programs apply. That’s why I linked to my student loan guide which has the information to determine the loan eligibility through NDSLS.

      • Meghann Austin

        Sell the car that is causing a $370 payment. Buy a reliable A to B car for $2000 and use that extra money towards what is needed. Dave Ramsey has some good budget books that may also help you.

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