“Dear Steve,
I’m a music teacher making $1,850 a month.
I’m 31 and suffering the consequences of bad/lack of financial advice early on and of course my own terribly decisions.
A few years ago when the calls started in earnest I jotted down notes on the names, location and totals of my student loans and I was almost $200,000. I managed to get the bulk of it put on forbearance or deferment.
-Collections Chunk-
I lost track of part of it and a chunk went into Collections. I don’t know how much it was. I could not pay. Eventually they stopped calling… I have no idea how to find out what is happening to that debt now.
-Federal-
Not a huge problem. Recently I starting looking hard to address this situation and have found a consolidation company who can work with the government to give me a reasonable payment plan and then eliminate the debt after 10 years.
-Private-
$90,333.56. Minus the mysterious Chunk in collections that figure is what MyGreatLakes.com shows.
-Budget-
Sucks… I’m going to be pinching pretty hard just to afford the $125 or so for the federal loan situation and Key still wants more than $500 a month for the $90k. That by the way is reduced IDR which could eventually increase to $879/month…
*I cannot pay the private loans
*I took a $10,000 pay cut this year
*my meager savings are gone
*my father cosigned on all of this and I doubly worried about completely ruining both our financial futures.
-News-
This week (with snowdays off school) Iv’e finally had the time to really look into this problem. I read information telling me that if I just stop paying… it could all go away. Some of that information I got from articles you contributed to on Huffington Post and then on getoutofdebt.org. I managed to have a half hour phone call with a guy at Pacific Business Management yesterday. They deal in helping people get out of private loan debt. He said they couldn’t take me on as a client but he gave me all sorts of advice on why I should just stop paying… it still sounds… risky, or dangerous or too good to be true.
Now I have a slew of questions regarding the private loans.
Q1: How can I track down the chunk in collections if I’ve lost all the paper work?
Q2: Is stopping payment on my $90K to key bank a feasible or safe idea?
Q3: I went to school in Kentucky though I live in Ohio. Are my loans subject to Ohio or Kentucky Statue of limitations? (OH statute 8 years) (KY Statute 15 years)
Q4: IF I stop paying… and don’t get sued… and the statute runs out. When does the 7 year clock start ticking to get it all off my credit score?– Does the 7 year credit score clock start ticking after the statute is over or does the statute clock and the 7 year credit reporting clock tick away at the same time?
Q5: IF I stop paying… and the statute runs out do I have to do anything afterwards to make it all go away or is it all just… magically “gone”?
Q6: How will all this affect my father as cosigner?
Q7: What is the best low budget way to increase my credit score while all of this is going on?
Adam”
Dear Adam,
On the federal loans, make sure you elected the income based repayment option for the consolidation loan. Both the direct consolidation loan and income based repayment plan election are free (no-charge) options available directly from the U.S. Department of Education. More details here.
Let me tackle your specific questions.
Q1: How can I track down the chunk in collections if I’ve lost all the paper work?
I assume we are talking about the private student loans. The only way to track them down is to get a consolidated credit report that includes data from all three credit bureaus. Of course that will only show loans reported by the lenders. You can also monitor your mail and phone calls for collection calls and then ask the debt collector to provide proof of the debt. Finally, you might want to contact the financial department of the school you attended and see if they have record of who they might have hooked you up with.
Q2: Is stopping payment on my $90K to key bank a feasible or safe idea?
Is it possible, yes. Is it without risks, no. Not long ago an attorney submitted a guest post titled Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan which seems to cover the reality and risk.
Sometimes, in the face of no other good option and a desire to get to a point where the lender will talk about settling the debt, you have to be significantly behind.
Q3: I went to school in Kentucky though I live in Ohio. Are my loans subject to Ohio or Kentucky Statue of limitations? (OH statute 8 years) (KY Statute 15 years)
You’d need to discuss that with an attorney licensed in your state who can give you a legal opinion. I am not a lawyer.
Q4: IF I stop paying… and don’t get sued… and the statute runs out. When does the 7 year clock start ticking to get it all off my credit score?– Does the 7 year credit score clock start ticking after the statute is over or does the statute clock and the 7 year credit reporting clock tick away at the same time?
The seven year clock with start when you last went delinquent. However, your credit score and credit report should be the least of your worries. It is relatively easy to rebuild credit but the focus should be on dealing with the debt and then picking up the pieces later and dealing with those.
Q5: IF I stop paying… and the statute runs out do I have to do anything afterwards to make it all go away or is it all just… magically “gone”?
You would have to file bankruptcy and include the out of statute debt for discharge.
Q6: How will all this affect my father as cosigner?
When you default the lender will go after your father for the balance due. As a cosigner he agreed to be 100% responsible for the debt if you didn’t pay.
Q7: What is the best low budget way to increase my credit score while all of this is going on?
Pay your bills on time, make sure you have open credit cards, and keep the balances below 30% of the available credit.
Please post your responses and follow-up messages to me on this in the comments section below.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
Do you have a question you'd like to ask me for free? Go ahead and click here.
- We Rise From the Dead Yet Again – Podcast - October 2, 2023
- Lexington Law Credit Repair Gets Hammered in Lawsuit Settlement. If You Sell Credit Repair – Wake Up! - August 28, 2023
- People That Got Scammed by Robocall Debt Relief Company Life Management Services of Orange County to Get Money Back - July 7, 2023
and i thought i was in a bad situation! i wholeheartedly hope you are able to get the situation under control and move on with life! i know i have spent many sleepless nights worrying about my student loans before i got on a plan and started throwing made dough at the principals. good luck!
Thankfully you only had sleepless nights. Others can stand the stress and worry and go so far as to take their own lives.
Just answered Adam’s question about his private student loans.