I Can’t Pay Sallie Mae – 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:


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.

Customer Service

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


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.

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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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