I have been paying on a $65,000 private student loan for about 4 years I worked out a deal where I pay interest only around $400 a month. None of the money goes to the actual principle. The original loan was for $30,000. Recently Sallie Mae started asking for $700 a month and I can not afford that! I can hardly afford $400. How can I settle this debt? Please help me or maybe you can point me in the direction of someone who can. Should I just stop paying? Will this effect my wife’s credit?
Well it sounds like the monthly payment they gave you is just helping you to tread water and not bring down the balance at all. You were probably delinquent at some point in the past or on a deferment plan. Both of those approaches just cause your balance to grow.
Sallie Mae is settling some student loans but it is not a straight-forward process. The settlements I’ve seen have been in the 50-60% range and they are accepting the balance in just a few payments.
While you can certainly contact Sallie Mae and inquire about settling your loans the process that seems to generate the most proactive settlement offers from Sallie Mae are when payments are in default. Consumers report they are getting settlement letters without even asking for them.
Falling behind on your payments will of course hurt your credit, increase your balances, and not guarantee you a settlement offer you can afford.
If you do settle the debts you need to be aware you should receive a tax form, 1099-C which will report the forgiven debt to the IRS. If you are not insolvent you may have to pay income tax on the forgiven debt. But if you are insolvent you may not have to pay tax. See this article.
If your wife is not a signer on your loans then your issues with Sallie Mae should not impact her individual credit.
Please post your responses and follow-up messages to me on this in the comments section below.Big Hug!
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