What Can Sallie Mae Do to My Mom? – James

“Dear Steve,

My mother has no clue what she is doing when it comes to finances and there is no question that my Mother’s student loans are going to default very soon (213 days and counting). She is 65 years old and a part-time hairdresser who works for a boss that requires her to pay for her own chemicals. We are talking $100-$200 on a good week! Anyways, she has NO BANK ACCOUNT; she had issues with the IRS years ago and as a result no longer uses banks.

She gets paid partially in cash and check, my father pays her taxes, they file jointly but she never has ANY tax refund she always owes, no property in her name whatsoever, (all in my father’s name), her credit is shot as is because she can not be trusted with credit cards anymore. Her cell phone is under my sister’s account (who lives with my parents due to serious medical issues of her own).

Last I spoke to Sallie Mae on my mother’s behalf they wanted to set her up with a payment plan that (once you did the math) would require more than $300 every month until she reached the ripe old age of 98!

I guess my question is: What can Sallie Mae do to her if her loans default besides pester her with phone calls and a collection agency?


Dear James,

I assume were are talking about private student loans here and not federal student loans being serviced by Sallie Mae.

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For private student loans the lender would have to sue your mother, get a judgment and an order to garnish her wages. Then they would have to try to do that. I don’t know if your mother has any assets to go after but based on what you said about her situation, it is doubtful.

Based on her age and income it seems the more likely scenario is for her to simply default and wait till the statute of limitations expires on the loans and then discharge them in bankruptcy. Yes, private student loans outside the statute of limitations can currently be discharged in bankruptcy. To find out exactly how to implement that solution you will need to discuss this strategy with a local bankruptcy attorney who is licensed in your state.

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When it comes to private student loans there are no mass elimination solutions and even getting them discharged due to disability is a nightmare, if at all.

Since the asked for payment is not affordable and it is highly unlikely she will be able to complete a full repayment solution that leaves her with default as a strategic default as a primary option. Sallie Mae may offer her a settlement of about 50% of the loan balance to satisfy the debt but those offers seem to be generated by a Sallie Mae internal process and not by debtors requesting to settle. If they decide to settle they will send your mother a letter and may even offer payment terms on the debt settlement.

In the face of no terrific solution for private student loan problems you just have to choose the least sucky option.

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

Damon Day - Pro Debt Coach

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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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