Student loan repayment help

[HennaDancer]

So my husband's student loans just came out of deferment, and we got the paperwork yesterday with a payment schedule. OMG. They want over $200 a month. We don't HAVE $200 a month to spare.
We're both working, although I'm part-time and he gets paid very little right now. I've been sending out resumes every day for four months and no nibbles. I've just started to rebuild our credit after years of unemployment killed it, and the last thing I want is to default. We don't have credit cards, nor do we own anything of note. Does anyone have suggestions as to what to do about this?

[Hello Again]

You can request an income-based repayment schedule, if they are Federal student loans.
http://studentaid.ed.gov/PORTALSWebA...sh/IBRPlan.jsp

[Eva Luna]

Are they Federally guaranteed loans? If so, call them and explain your situation, and they will probably work with you. I have no clue about private loans.

[HennaDancer]

Yes, they're federal. I will try that link. THanks!

[HennaDancer]

Okay, there's a calculator which says we can get payments down to $160, which is better, but still out of reach. What's my next step?

[Hello Again]

Originally Posted by HennaDancer

Okay, there's a calculator which says we can get payments down to $160, which is better, but still out of reach. What's my next step?

Contact your lender and request new repayment terms. Scroll all the way down to the end of the page at the end of the link.

[IvoryTowerDenizen]

Originally Posted by HennaDancer

Okay, there's a calculator which says we can get payments down to $160, which is better, but still out of reach. What's my next step?

We applied for economic hardship deferment. I think we only paid the interest or defered the whole payment but accumulated interest, but I really don't recall exactly. That was around 1995. I don't know if it's still an option, but you can ask.

[Kimballkid]

As stated above, the best bet is to contact the Loan Collections Office (or equivalent) at your school or lender (if not a school) directly as they would rather work with you than have you default. There are options for economic hardship deferment, modified payment plans and, if you or your husband work in certain jobs, cancellation privileges.

Again, please, please contact the lender and they can and will explain your options. Don't try to do it from some website as direct contact is best in this case.

[DiosaBellissima]

Originally Posted by HennaDancer

Okay, there's a calculator which says we can get payments down to $160, which is better, but still out of reach. What's my next step?

Have you actually sat down and written down all of your monthly expenses? I don't deal with student loan repayment, but taxes, and I can't tell you how frequently I'll have a client tell me that they can't afford even one cent to the IRS because they are upside down each month. . . only to have them write down their financial situation and discover that the reality is that they have a free $500 a month.

Now, it's certainly ok not to have the ability to pay that $160 a month, but you're going to need to be able to account for why when you ask them to lower it. Where is that money going?

[StusBlues]

Originally Posted by DiosaBellissima

Have you actually sat down and written down all of your monthly expenses? I don't deal with student loan repayment, but taxes, and I can't tell you how frequently I'll have a client tell me that they can't afford even one cent to the IRS because they are upside down each month. . . only to have them write down their financial situation and discover that the reality is that they have a free $500 a month.

Not to derail, but can you give some examples of this?

(This might help the OP as well, so I guess it's not that irrelevant.)

[md2000]

The point would be that some expenses people "can't do without" are pretty frivolous. Cell phones, for example. Yeah, it's horrible not to have one nowadays, but... is it more important than being garnisheed for student loans? How expensive is the car? How much do you spend on cable TV, frivolous groceries, etc. ? How much on rent?

Basically, if $160/month is a problem for you, the problem is not the $160/month - especially if it's "the two of you". You need a better job or a second one...

[Quartz]

Originally Posted by md2000

Basically, if $160/month is a problem for you, the problem is not the $160/month - especially if it's "the two of you". You need a better job or a second one...

She needs a first job, never mind a second.

[Rachellelogram]

If they're all federal loans (Staffords, Perkins, etc), do a consolidation and pick the IBR (income based repayment) plan. I have almost 12k in federal loans, but I'm only paying between 64 and 85 a month.

You generally CANNOT consolidate private loans to pay a lower amount, though. You do not have a choice to lower private loan payments except at the discretion of the lender. They are unlikely to offer a deferment or forbearance, because private lenders are assholes.

So your plan of action should be 1) Consolidate all the federal loans together. 2) Choose the IBR plan. 3) Do whatever you have to (scrimp, get another job, sell your children) in order to pay the private loans in full, every month. The fees on those will get out of hand very quickly if you don't keep up in full, and you have NO recourse to get them forgiven--bankruptcy doesn't work for student loans, whether federal or private.

[Rachellelogram]

Upon reading the whole thread, I see your loans are all federal. This is great news! Consolidate them if you haven't already, this is really the best way to lower your monthly payments. I consolidated within the last 6 months, and it was the best financial decision I've ever made--it also hugely reduced my stress levels. But, if they say you can afford to pay more than you think you can afford, you're still going to have to pay that amount.

There are more options in most peoples' budgets than they think, though. You might have to cancel your cable or downrate your cell phone to the most basic plan or shop at Aldi or take public transportation (if that's an option). This is not meant to sound condescending, either, you may have already done some or all of these things (and if so, fantastic!). But honestly, as long as you are living within your means, you WILL be able to afford the IBR repayment option.

The thing is, with student loans, the lenders expect your husband to have a fairly-lucrative job using the degree he bought with their money. They expect to be paid back. Hopefully he's putting out the resumes as much as you are.

[Randy Seltzer]

Originally Posted by HennaDancer

[snip] ... and the last thing I want is to default.

Default on student loans? Not really an option.

[md2000]

Originally Posted by HennaDancer

...We're both working, although I'm part-time and he gets paid very little right now...

Originally Posted by Quartz

She needs a first job, never mind a second.

Or, as the joke I used to hear from engineers goes...
Q: "What does the arts graduate say to the engineering graduate?"
A: " DO you want fries with that, sir?"

There are lots of jobs, just they are very demanding, boring, low paid, and not very fulfilling; and very likely not in your field. However, that's life.

Originally Posted by Randy Seltzer

Default on student loans? Not really an option.

Of course it's an option. What's not an option is the accumulating debt going away just because of default.

[VOW]

It's also my understanding that a judgment levied against you, and student loans are the two debts that cannot be erased through bankruptcy.


~VOW

[Inner Stickler]

Note that consolidating federal loans may mean you give up some perks like loans going back into deferment if you become a student again.

[Martin Hyde]

With Federal student loans you can apply for a deferment under a set of special circumstances, deferments typically defer both payment and interest.

You can also apply for a forbearance under just about any circumstances. A forbearance just means they do not make you pay the loan, but interest still accumulates. I have a nephew who hasn't paid a dime on his student loans and is 34 years old and bought a house just two years ago. His Federal student loans have been in deferment the whole time, and he actually has a very large amount of accumulated interest now.

Not a wise path to go down, but at least in his case the chickens have yet to come home to roost. (I've tried to advise him he tries to follow some strategy to at least start paying down the monthly interest to stop the bleeding, but as long as the government hasn't forced him to he can't be convinced to take any amount of money out of his monthly budget.)

Just something to keep out there as an option, you can generally get a 12 month forbearance over and over again.

[Translucent Daydream]

Originally Posted by VOW

It's also my understanding that a judgment levied against you, and student loans are the two debts that cannot be erased through bankruptcy.


~VOW

This is very true. You cannot discharge this type of debt with either chapters of bankruptcy. Generally you can call and work down the payment to something reasonable. I have never had a problem getting my loans deferred and this is something that you should really look into.

Also, every time I have talked to The Department of Education they have been pretty understanding on this.

I don't know if the number is still good, but you can try calling the Department of Education Borrowers Inquiry line 1-800-621-3115. That used to be the number of their direct loan servicing department. (My mind is a little foggy on that at the moment, its been a few years since I was in that line of work)

[DiosaBellissima]

Originally Posted by StusBlues

Not to derail, but can you give some examples of this?

(This might help the OP as well, so I guess it's not that irrelevant.)

Sure, it's not really anything particularly top secret, just a matter of actually breaking things down appropriately. If the OP would like a handy place to do it, I'd suggest Page 4 of the IRS 433a. Income goes on the left, expenses go on the right. For things that change monthly (electric bills, etc.), just average the last 3 months.

For me though, there are things that wouldn't readily go on there that I spend monthly, but this is a good starting point. Use this as a base, then open a spread sheet and add all your monthly expenses.

Maybe the OP does have $160 after all is said and done, but it's just tied up in somewhere she doesn't realize. Or maybe she doesn't, but now she'll have proof of that.

[KidScruffy]

Originally Posted by VOW

It's also my understanding that a judgment levied against you, and student loans are the two debts that cannot be erased through bankruptcy.


~VOW

I just want to stray off topic for one second and say that in many circumstances a judgment can be dealt with via bankruptcy. Not always the case, but I don't want anyone misled by the above statement (which is pretty accurate as to the student loan part).

[lazybratsche]

Originally Posted by Inner Stickler

Note that consolidating federal loans may mean you give up some perks like loans going back into deferment if you become a student again.

This probably depends on the exact loan program, but it's not true in my case. I consolidated subsidized Stafford and Perkins loans, and they're now deferred while I am in grad school. I do recall a letter that listed some benefits that I would lose by consolidating, but they weren't benefits that were relevant to me. I think I lost something like a chance to have some of my loans forgiven if I teach in low income schools, or something like that... But the deferral and forbearance terms still apply.

[GiantRat]

Originally Posted by md2000

Or, as the joke I used to hear from engineers goes...
Q: "What does the arts graduate say to the engineering graduate?"
A: " DO you want fries with that, sir?"

There are lots of jobs, just they are very demanding, boring, low paid, and not very fulfilling; and very likely not in your field. However, that's life.



Of course it's an option. What's not an option is the accumulating debt going away just because of default.

Arts graduate here. The engineers are my subordinates.

[HennaDancer]

When you're talking about consolidation, that's getting another loan to pay off these two and combine the payments, right? Would I do that through the original loan people or through a bank?
And I agree, I need a better job. Hence my including the part about applying for at least a couple of them a day for the last four months.

[Eva Luna]

Originally Posted by HennaDancer

When you're talking about consolidation, that's getting another loan to pay off these two and combine the payments, right? Would I do that through the original loan people or through a bank?
And I agree, I need a better job. Hence my including the part about applying for at least a couple of them a day for the last four months.

The Feds do it. If I were you, I'd check with them first. I did it a number of years ago and they were quite decent to me about forbearances through a period of reduced income/crazy medical expenses.

[md2000]

Originally Posted by GiantRat

Arts graduate here. The engineers are my subordinates.

So that Renaissance Literature degree came in handy? Helps to study Machiavelli, eh?

Seriously, jokes aside, smart and capable organized people will tend to succeed whatever they learn. Learning a technical trade or profession can help (or sometimes hold you back), but management is not usually something you can learn, it's an aspect of character.

OTOH, I've had really bad bosses, both technical and not, whose sole capability was sucking up to superiors.

[Really Not All That Bright]

Originally Posted by VOW

It's also my understanding that a judgment levied against you, and student loans are the two debts that cannot be erased through bankruptcy.


~VOW

Originally Posted by KidScruffy

I just want to stray off topic for one second and say that in many circumstances a judgment can be dealt with via bankruptcy. Not always the case, but I don't want anyone misled by the above statement (which is pretty accurate as to the student loan part).

In fact, in personam liability for a judgment is typically discharged through bankruptcy automatically unless the creditor takes steps to enforce it. Even student loans can be discharged in bankruptcy under very limited circumstances.

Hijack over.

[Snickers]

Originally Posted by StusBlues

Not to derail, but can you give some examples of this?

(This might help the OP as well, so I guess it's not that irrelevant.)

My sister-in-law is currently going through some financial woes, so I'm familiar with this sort of activity. Like Diosa said, she's put together a spreadsheet that lists her income and every bill she has. Then we went through and thought of every sort of expense she would have - everything gets a category. Groceries, smoking, her dog, car insurance, hair cuts, car maintenance - everything. Pay close attention to those things that you might not pay every month (vet bills, insurance) to make sure they're accounted for. Try as hard as you can to think of everything, even the smallest expense. (She's at the point where every penny counts. Literally. She bought a book for $5 the other month that threw off her budget to the point where she spent the next two days tracking it down.)

Then she took a look at what she could cut. Grabbing a quick lunch from the deli during the workday? Not any more; she packs her lunch. Smoking? Cut back, and switch to a cheaper brand. (She's also looking into quitting, even though that's its own hard road to walk down.) Phone plan? She's in a contract right now, but she contacted the provider to see if there was any way they could work together to reduce the bill. As soon as her contract's over, she's going to drop to the lowest plan she can get, or possibly ditch the cellphone all together. She takes the bus to work, and is thinking about selling her car. She's sold a bunch of other stuff that she doesn't have a use or place for. She's totalled up every bill and looked at how she can pay them off using the "snowball" principle.

It's pretty hardcore budgeting (way deeper than what I do), but she's found lots of places where she can save. She's got a long, long way to go, but it's pretty impressive what she's already done. It does take a long, hard look at your current lifestyle choices, though.

[md2000]

I once heard a joke about "need"...

"All we NEED is a pair of pants and 2 pair of underwear; and a shirt if you're female. Oh, and boots if it's winter. Everything else is optional."

Which is basically true. It's amazing how much we pay for that can be skipped if the money just is not there. The best time to realize the money is not there is before it becomes an extreme negative number.