I need financial advice!

jennmonkeyJuly 26, 2005

Okay, here is my story. I have about 60k in student loan debt becuase I got my BA from a private university (big mistake #1). 20k of that is federal loans, which is not the problem. 40k is in private loans (big mistake #2), which are becoming the problem. The company the private loans are through are terrible. Part of the problem is that I can only get in-school deferrment while I'm paying the interest off first (I would like to go back for a masters, am working in social work and making little money). The private loan company has been sending me payment schedules for the last 4 years, since I graduated. They all said I would be paying the interest only until 2008, then my payments would start going up very steeply (at the end of the loan, they are almost $800/month). Well, I had always planned to go back to school before 2008 and hopefully make more money to make the loan payments. So, here's the problem; I received another loan repayment schedule this month that says my payments go up (and am done with interest) next year, oct. 06. I call them and they basically say "too bad, we were wrong for the last 4 years, your payments go higher next year".

So, now, I am basically screwed, starting next year I will have $500/month in loan payments (which I can possibly pay but will just keep going higher), I can't ever go back to school unless I plan on working full time to keep making the payments, and nobody will refinance/consolidate the 40k because I have no assests. I think I can declare bankruptcy on the 40k because it is a private loan, not federal, but I hate to ruin my credit when I have no other debt but this. I feel totally stuck. Anyone have any advice? Should I go for bankruptcy, or just do what I can to try and pay the loan (at least till I can get it down and maybe try to reconsolidate later)? Basically, if I were able to pay it off on time it would be paid off in 2014, although I think I end up homeless if I try to make the payments. :(

any advice from you financial wizards would be appreciated.

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Despite the fact that customer service at the private-loan company does not appear to be a strong suit, I would try to get an appointment with a loan officer in person and state (plead?) your case. It is possible that rules can be bent and you all can agree on a repayment schedule that works for everyone. You don't want to go into bankruptcy. And they don't want you to default on your loan, either. So you both have an incentive to work it out.

That said, there may be only so far they can bend or only so much you can afford. You're also looking at more bills if you plan to go back to school (where is that money coming from?).

This part probably is going to hurt, but you need more income (or lower expenses). It's not clear to me if you're working full-time now, but if you're not, you probably ought to start. If you're working full-time now, you might want to look for a better-paying job in your field (if such an animal exists). Failing that, you may just have to look for an additional part-time job that pays decently (retail cashier or waiter/waitress comes to mind, or maybe less-traditional jobs like delivering pizzas or newspapers) and dedicate the proceeds to retiring your loans. You're not going to earn lots of money, but a few hundred a month will help a great deal -- especially since, without assets or a high-paying job, it sounds like you're living pretty close to the edge and any other large expense (big car repair, big medical bills) could send you under.

Good luck! Treat bankruptcy as an absolutely last resort. If there is no other choice, though, get it done by October, when the bankruptcy law changes or you really won't be any better off than you are now.

    Bookmark   July 27, 2005 at 12:05PM
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Thanks, I agree about bankruptcy being a last resort. I work full time and would have a difficult time making much more. If I were to go back to school, I could get more grant money than I was able to last time (since my parent's income was counted then due to my age). I have almost no other expenses, have a used paid-off car, no other debt at all (paid off all the credit cards, etc.). I guess I'm not so worried about the immidiate future, as I can probably swing the payments at the beginning. I am just worried about the payments toward the end of the loan (when it gets to be around $800). I guess I can try to consolidate and extend the loan in a few years when it is a smaller amount to get another loan on. I have tried everything with them, they are jerks. One time I had a late payment, I called to ask if I could make a partial payment that month and they said "If you don't pay it all on time, you will be in default and we will sue you for the full amount of the loan", and that was that. Yikes. Anyway, I'm sure it will all work out somehow. Although I will be furious if I have to find part-time work on top of my full time job just to pay this loan. ARGH. Thanks for the advice steve!

    Bookmark   July 27, 2005 at 6:56PM
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Are you sure you can get more grant money if you go back to school? When I went back to school to get my masters, I was told I was no longer eligible to receive grant money. Fortunately, I ended up an assistantship(sp?) and was able to make it with that and subsidized loans.

    Bookmark   July 27, 2005 at 9:56PM
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Yeah, my experience with college loans was no treat, either. Kinda like they hire the people who aren't qualified to work at real banks, facing customers. That, or ex-students tend overwhelmingly to act in ways that make student-loan officers do what they do ...

Sounds like you're in fairly decent financial shape. Your best bet might well be to consolidate, though it will mean you're paying extra interest when you could be paying principal. OTOH, if they're going to be that rigid, it may be your only option. Besides getting another job. Or bankruptcy. Good luck!

    Bookmark   July 28, 2005 at 9:39AM
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Well, looks like I'm running out of options. It appears bankruptcy isn't an option, because even though it is a private loan, it is still called a "student" loan which makes it pretty impossible to discharge with bankruptcy (according to the bankruptcy lawyer I spoke with). I talked to my school to see if there is an ombudsman who I could talk to, but apparently they will only talk to you about federal loans. The school I went to won't even allow people to borrow money from this loan anymore because they are notorious for being horrible. I can't find anyone to consolidate it, because it is too much money. Looks like I will have to fake my own death, LOL. I may have some legal recourse for breech of contract, but not likely. I am trying to directly speak with the lender about it, which is proving to be difficult. I'm not giving up yet!

    Bookmark   July 28, 2005 at 8:10PM
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Good for you! Keep your chin up!

    Bookmark   July 29, 2005 at 9:05AM
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one cheering note (well, maybe not so cheering?) is that if you take a second job to pay the loan down, you'll find that you have less time to SPEND money, so you'll be able to pay it down faster....

Good luck!

    Bookmark   August 1, 2005 at 4:46PM
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I had an extreme idea but then saw that you live in Seattle and so it may not work. The idea was that if you could buy a house- with help from family -at a really good price perhaps you could get an equity line of credit and pay off the loans--and while you would still have to pay every month you could spread it over 30 years and you would also have a second investment (your education being your first). I am sure there are many holes in this idea but sometimes one thought leads to another and then a solution. Good luck

    Bookmark   August 7, 2005 at 5:13AM
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Thanks for all the suggestions everyone. There is nobody in my family that could help me buy a house, although that would be nice! I'm also not ready to settle down in one house for the next 30 years. I think I'm just stuck. I might see about free legal advice but I doubt there is anything I can do. Oh well. I guess I'll worry about the $700/month payments when I get there, or maybe I could try consolidating/refinancing the loan once I pay it down some.

    Bookmark   August 9, 2005 at 8:28PM
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Okay jennmonkey, this is tough, but I just want to give you some encouragement that many of us have been in the same boat and lived to tell.

What does your original contract really say? If it says 2008, they can't abitrarily change that. Go back and read.

Bankruptcy for reorganization of payments of loans might still be an option. It won't make the debt go away, but it could make it managable.

I don't know about Washington, but many states have forgiveness programs which will pay off private loans for a committment of job service. Usually in remote or low income areas. Here in Alaska there are some programs for people who work with the Alaskan Native population. I had one many years ago for teaching special education as long as I stayed in Missouri.

Free advice is sometimes as good as you pay for it, so don't discount spending some $$$ with an attorney and someone who deals with many folks with these issues.

Don't feel bad. When my oldest son started school 3 years ago, the college tried to steer him to the private loans. The DH is a CPA and a Certified Financial Planner and we found other routes. If he hadn't known, my son would have ended up in the same boat. The real bite for us was that the feds would not consider his father's income, only basing everything on his step-dad's which killed his chances for any grants, even though his dad doesn't make squat.


    Bookmark   August 11, 2005 at 11:11PM
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This sounds like a Suze Orman question. What do you think?

    Bookmark   August 13, 2005 at 5:56PM
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Can you go back to school and get a deferrment? Now may very well be the time, if you can manage...

    Bookmark   August 22, 2005 at 10:15AM
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No, the private loan will not allow you to get in school deferrment after the first five years of the loan (I have been under the impression that it was 8 years, which is part of my problem with this loan now). So unfortunately, I will have to continue paying the loan while in school if I decide to go back. I am pretty sure there is nothing I can do at this point but try and pay the loans. It shouldn't be a problem for the next few years until the payments start getting really high.

    Bookmark   August 28, 2005 at 5:34PM
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With regard to buying a house:

A friend of mine bought a home in a university town when his kid began post-seconday education, putting up only the down payment.

They took in several students, whose rental fees paid the mortgage costs - and some beside, as I recall.

As he was employed and had assets, he didn't have trouble obtaining a mortgage, but you, with major debt and minimal income, might well be unable to obtain a mortgage.

Just a thought that, while it may be impossible for you, might be an idea that you might consider, and find away to implement.

ole joyful

    Bookmark   August 30, 2005 at 2:38PM
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If you signed a contract listing terms and interest rates etc, are they breaking this contract illeglly? Take the paper work to your local attorney general, either state or county. Contact the college and request legal help as they now admit this is partly their problem. Talk to your bank/credit union for help. They might refinance for you.

    Bookmark   September 4, 2005 at 5:46PM
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Email me if you wish to fix your credit problems.

I help anyone!!!!!

    Bookmark   December 5, 2005 at 9:59PM
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