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My Opera Singer Wife Will Never Get Out From Under the Student Loans

By on January 20, 2015

“Dear Steve,

My wife has several federal student loans from grad school dating back to around 2005

She also took out two private student loans through Chase in 2005 and 2006

It has been sold several times and now is with AES. The interest is killing us. She sings opera, I’m a personal trainer. we simply don’t make enough. She pays $500.00 a month and it only goes to the interest.

We’ve been looking online, and talked to a family lawyer but we’ve all been told too bad it sucks to be you. What can we do?

I’m on loan deferment, we have her federal loans deferred, but now we don’t know what to do about these private loans.

They say we can’t defer, and paying anything less than the $500 a month just results in defaults and or being told we’ve payed late, etc. Is there a way to get those loans into a federal repayment plan?

We’re at our wits end, and we hardly survive as it is.

Thanks

Bethany and Amanda”

Dear Bethany and Amanda,

Thank you for writing to me about your student loan situation. Thankfully you did. I was greatly concerned when mentioned you had federal loans in deferment. There is almost no good reason to do that based on your projected future income.

Instead, you should spend time looking at the Income Based Repayment Program that will reduce your federal loans to what you can afford based on income. Under this program, even a $0 monthly payment is considered a full payment based on income requirements.

It’s not a perfect plan but it is better than just letting the loans sit there running up interest and balances. Any balance left after 25 years will be forgiven. For more on this, read The Ultimate Guide to Dealing With Student Loans You Can’t Afford.

Depending on what kind of company you are a personal trainer for, ten years of on-time payments can lead to your loans being completely forgiven through the Public Service Loan Forgiveness program. It’s not unreasonable to hope you work for some sort of non-profit or even government employer.

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There is no way to convert a private student loan to a federal loan program. One way to convert it to something else would be by using an unsecured debt consolidation loan. But then again, this approach would depend on the amount you owe and the interest rate on the loan would most likely be substantially higher. Unfortunately your options on dealing with those loans are a bit limited and none to fun.

If a private student loan lender will not help you with a sustainable payment you can afford then it can be argued it might makes sense to stop paying them. I know, it seems harsh, but keep reading. See Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.

As backwards as it sounds, and even considering the risk of being sued by the lender, people actually demonstrated they are getting access to better solutions for their student loans by defaulting. Defaulting is a serious action. It will hurt your credit score and as I mentioned, it can lead to being sued, but that’s not always a bad thing.

If you default on your student loan debt and the lender does not sue you and the debt expires under the statute of limitation in your state, you could discharge the private student loan debt in bankruptcy. Obviously you’ll need to discuss this approach with a lawyer licensed in your state.

If you are sued and you stand up for yourself, they might not be able to prove the validity of the debt or they may negotiate a reasonable and affordable repayment plan.

If you do decide that defaulting is the approach you want to take, try and save the money you would have used to make the student loan payment in a savings account in case you need the money to take advantage of the final option, settlement.

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Private student loan lenders are settling delinquent student loan debt for about 50% of the balance due and giving people any option of paying in a few payments or up to two years.

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

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About Steve Rhode

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.

One Comment

  1. Steve Rhode

    January 20, 2015 at 4:34 pm

    Bethany and Amanda, thank you for writing to me. I just answered your question.

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