My husband and I have been married for 6 months and have a baby due in the fall. My husband has over $100,000.00 in Sallie Mae private loans. His parents took these out for him on his 18th birthday, and sent him to a private college out of state where he graduated in 4 years with a bachelors in English.
He’s 28 years old now and the payments on these loans have always been difficult to manage, but with facing my unpaid maternity leave, we have no idea how we are going to get through.
What happens if we default on private loans? Do we have any options at all to buy us time or change our minimum payment? According to Sallie Mae, there is really nothing we can do.
Just because Sallie Mae is servicing these loans does not necessarily mean they are private loans. Sallie Mae does service some government backed loans as well. If you want to check, click here and look for info on NSLDS. But if you specifically know these are private loans then I’m afraid the news is not good.
No private student loan lender is required to make any modification to any loan for any reason. The U.S. Department of Education has some awesome programs to allow people to forgive or adjust their monthly payments based on what they can afford to pay. Private lenders just simply don’t. And they even have horrible plans to deal with disability, loan forgiveness, and the like.
It used to be up till 2005 that private student loans that were unmanageable could be discharged in bankruptcy. Bankruptcy reform back then eliminated that option.
You may find yourself defaulting on your private student loan debt simply because you can’t afford it. There might just not be any money to make a payment with the reduction in income. It is what it is.
If you default then the lender can pursue the remedies agreed to in the original loan document. If his parents signed for the loans or co-signed then the lender can go after them. They could pursue collection, sue him, try to garnish his wages or the wages of those responsible for the loan.
If his parents are obligated for these loans you might want to let them know what is going on so they can make the payments if they can or want to.
A tiny ray of light is Sallie Mae does offer some settlement agreements for defaulted debt. They seem to have their own internal policy for determining who and when. I have seen them offer settlements as low as about 50 percent of the loan balance and they sometimes offer payment plans or insist on a lump payment.
I know you don’t need me to rub it in at this time but for others that might just be headed off to school there has to be some consideration of the cost of education versus the degree obtained. I can’t imagine that an english degree graduate could earn enough money starting out to support $100,000 in student loans. Can they?
Please post your responses and follow-up messages to me on this in the comments section below.