Should I Stop Paying My Private Student Loans Now?


Dear Steve,

I graduated in 2006 with over $50k in private student loans. After I graduated, Citi wanted $400/month. Unable to make the payments, I went on years of deferment and forbearance as my loan was bought and sold by several banks and lenders. My loan reached a max of $110,000.

I am now 10 years removed from college, and my principal balance is over $106,00 with 12% interest accruing daily. My monthly payments are $636 and pay interest only. In 1 year, that payment will balloon to over $1,100/month for the next 10 years.

I have a well paying full-time job, but I have had to take on 2 additional jobs just to keep up with this massive loan along with my other bills. My wife, daughter and I have also cut out several “unnecessary” aspects of our lives in order to cut costs. Alone, I make nearly $75k. Together, my wife and I are over $100k. But we have less than $1000 in emergency money, $0 savings, and I have had to put a stop to my 401k since the bills became overwhelming. Not to mention my daughter’s college and savings accounts have also stopped.

Would it be worth it for me to stop paying my private student loans? I would like to stop right now, but the thought of 10’s of thousands of dollars being added to that massive loan literally makes me sick.

We are also trying to finally get out of an apartment and attempt to buy an affordable house that matches the rent we pay now. Will not paying my loans ruin that chance?



Dear Antonio,

Sadly your situation is very common among the people who reach out to me for help. The bad news is private loans are not required to offer the same flexible repayment plans which are available to those that have federal student loans.

Any time you are not making the minimum payment to cover at least the monthly interest charged, the balances will grow. If you become delinquent then the balances can grow by another 20% or so for added collection costs and penalties. I often see people who put loans in deferment or forbearance to make it through the month, only to later be shell-shocked by the exploding balances.

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I have previously published the Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan and that information remains valid. But there is no easy way out of private student loans. It is truly a good news, bad news situation.

It is even possible to settle private student loans with some lenders for less than you owe but they tend to want the settled amount fairly quickly or over a few payments. You can read more about that here.

When you stop paying on your private student loans the balance will grow, you will be in collections, it will appear as a negative item on your credit report, you could be sued, and it could result in a wage garnishment.

Alternatively, you might be able to use the tips in this article, settle your private student loan debt, or find that your private student loans can be discharged in bankruptcy.

There is no doubt there are negative consequences for not paying at least the minimum amount you agreed to. But as you can see, there are some options. The options can be daunting and hard for the average person to wade through with any skill. If you want to talk to someone about this mess, you might want to contact my friend Damon Day and have a chat. He is an exceptional debt coach.

As you sit and ponder over the situation I think you have to consider the future cost to you for not doing anything. You’ve said your savings and retirement savings is abysmal. You have to ask yourself if the loss of this important time of retirement savings now is worth the pain you might have to face to deal with the private student loan problem.

The money you put away in your 401(k) today, will grow exponentially for when you retire. Time is the greatest asset you have to make your retirement account grow. You can see how much you will have by using my online calculator, click here.

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I don’t think you should contemplate how to best deal with this situation as yourself today but as yourself 40 years from now.

When the day comes where you can no longer work but need money to live safely and care for yourself, would you rather retire poor and broke because you didn’t deal with the loans today?

If you are 30-years-old now and saved just $1 a day and retired at 70, you would have about about $190,000 in retirement income. If you saved $300 a month you’d have about $1,900,000 to care for you and your wife. Right now as things stand with your current strategy you’ll have $0.

About a third of people say they will only have Social Security to retire on. But you can barely live on the limited benefit Social Security offers and will Social Security even be there for you when you retire?

If you want a guarantee or magic wand to deal with your private student loans, there isn’t one. But if you want some strategies to use to attempt to deal with your loans, I’ve given you some good tips and links. What you ultimately decide to do is up to you.


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.

Damon Day - Pro Debt Coach

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