topic Re: whats worse ? foreclosure or defaulting on student loans??? in General Credit Topics

whats worse ? foreclosure or defaulting on student loans???

Anonymous — Fri, 19 Sep 2008 20:49:10 GMT

We willl soon be at a fork in the road, either A.( pay the mortgage payments, but then default on student loans.) OR- B. ( pay loans and foreclose on mortgage.) ugh !! hate that choice, the way I currently see it is better to foreclose and pay the SL's,because we could recover better than getting out of the SL, they are HUGE private loans with Sallie Mae .70K. ( who will not refi them and all defferrments are used up. Esp when you factor in the fact that we co sogned, and this would us only paying a part of the mo payments, she is paying 400. and is drowning already under that load. Anyways- any thoughts on it anyone?? Spooky

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Fri, 19 Sep 2008 20:56:29 GMT

This is a horrible situation. Any chance of getting a roommate to keep house, or renting the whole thing out?

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Fri, 19 Sep 2008 21:28:51 GMT

First of, my heart honestly breaks for you (and others that I see ALL the time in the same boat you're in!!)!!! For whatever it's worth, you'll be in my prayers!!

Anyway, you asked for opinions, and here's mine (otherwise, I'll ramble on at you all day!!):

Me, I'd default on the SL before the mortgage.

1) Foreclosing will more than likely not only result in your credit getting whacked, but also leave you with a hefty collection/judgment on your CRs (unless you are NOT upside down, of course). A lot of homes have lost more than 30% of their value (at least around here, they have). You probably won't be able to sell it (or the bank won't be able to, meanwhile, your credit goes further and further down the pooper). So you may very well end up owing on the foreclosure MORE than what you owe on the SL.

2) If you have a foreclosure, you won't be able to buy another home for at least 3 years. And if the current climate continues, I wouldn't be surprised if they tightened THAT regulation up.

3) Along with "1", you probably won't be able to find a rental for THAT much cheaper than your current mortgage. Around here, a mortgage on a $300K home is roughly the same as it is to rent a 3 bedroom apt (read: $1200).

No matter what you choose to pay, you're still going to have to pay for a place to live. Why not have it be the one that you can get some relief at the end of the year from Unky Sam (AKA, tax deductible interest)? That money could possibly be thrown at the SL.

4) To reiterate, you HAVE to have a place to live. You can't work, sleep, eat without a home (or without paying for one). But you can work, sleep, and eat without paying a SL.

If you default on the SL you'll end up having a $70K debt. If you default on the mortgage (and have to sell and get a rental), you'll probably end up owing the $70K SL, $XX/$XXXK on the defaulted mortgage AND still have to pay rent.

And you know what?? I don't know ANYONE with a brain who'd fault you for choosing your home over your SL. Not a single soul. Not even the jerkiest, butthol-y-ist, self-righteous creep on the face of the planet would blame you one bit. I'll bet you that even the most self-righteous-reading-only-from-a-script SM CSR would agree that your home is FAR more important. By FAR.

Have you tried talking to SM and seeing if they can help you at ALL?? Surely, they'd rather accept smaller payments than try to bleed a turnip!!

If I were you, ESPECIALLY with the current credit climate, I'd consider (if SM won't accommodate you) calling the media. Let them know that you're having to make that choice because friggin' SM won't help you. See if that helps any!

What state are in you, BTW?

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Fri, 19 Sep 2008 21:32:58 GMT

At first my thinking was..oh no...don't mess with student loans, those will never go away. But...my thought is that you keep the house, and although this seems backwards to have to do this...Sallie Mae won't offer consolidations anymore, but if you default on the loans you should be eligible for rehab and then they will likely work with you on payment arrangements. If I am correct in this way of thinking, then I would do things this way. IF rehab after default would not be an option, I would say ditch the house. All kinds of bad things come from not paying SLs, court, wage garnishments, tax returns intercepted, etc.

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Fri, 19 Sep 2008 21:39:12 GMT

@Anonymous wrote:
At first my thinking was..oh no...don't mess with student loans, those will never go away. But...my thought is that you keep the house, and although this seems backwards to have to do this...Sallie Mae won't offer consolidations anymore, but if you default on the loans you should be eligible for rehab and then they will likely work with you on payment arrangements. If I am correct in this way of thinking, then I would do things this way. IF rehab after default would not be an option, I would say ditch the house. All kinds of bad things come from not paying SLs, court, wage garnishments, tax returns intercepted, etc.

No, these are private loans ... private loans (IIRC) can't garnish and can't intercept. They CAN sue and usually will after a few years after default (I believe a short while before SoL -- private loans DO have a SoL unlike Fed loans). So, really, the worst that can happen with defaulting is a judgment and ugly lates on their CRs.

My thinking is simply that they have to live SOMEWHERE. So they'll be paying for board anyways. And if they're short on the mortgage, they could end up with nearly $200K in debt, rather than the measley (when compared to both mortgage AND SL) $70K.

Like I said, here, you pay nearly the same for rent as you do mortgage. And whether it's rent or mortgage, they probably won't be able to afford the SL either way.

If I had to choose between literally living on the street or paying a SL, I'd choose defaulting on the SL any day of the week. ESPECIALLY if they have kids!!

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Fri, 19 Sep 2008 22:46:02 GMT

Well if that's the case, then I totally agree. One way or the other you will be screwed credit wise, you might as well keep your place to live!

Re: whats worse ? foreclosure or defaulting on student loans???

athensguy — Fri, 19 Sep 2008 22:50:10 GMT

Also, is there any way for you to ask the SL people if you can get another deferment?

Re: whats worse ? foreclosure or defaulting on student loans???

niecey89 — Fri, 19 Sep 2008 22:59:26 GMT

I have a Sallie Mae private loan that is in collections right now (not making full payments every month). FYI, you can only defer them I believe Twice. I used up all my Private loan deferments. They refused to lower the payments when requested. Also made arrangements with CA and making payments but they still harass me at 2-3 times a day.

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Sat, 20 Sep 2008 00:52:18 GMT

What's your plan for the future? Any way you go, you'll have to pay for rent/mortgage and probably student loans. They can garnish your wages for private loans in some states. Even if you do foreclose and/or stop paying the student loans, you will still have to find a place to live and they could still forcibly take the loan payments. You need to find a way to reduce your expenses or increase your income, unless this is a temporary situation (like someone lost a job or something).

Have you tried working with the bank that holds your mortgage? Let them know ahead of time that you're having trouble and see if they can rework your payment schedule, temporarily or on a more permanent basis.

http://www.freddiemac.com/corporate/buyown/english/avoiding_foreclosure/where_to_get_help.html

As someone else mentioned, if rent is cheaper (can you get by with a smaller place?) think about renting out the home to someone and renting an apartment for yourself.

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Sat, 20 Sep 2008 01:32:50 GMT

Well, I want to thank you for your advice, It has been a rough couple of weeks and i appreciate you. We are in our early 50's, upside on our mortgage due foreclosures all over in our community ( I live in Howell Michigan) we are in a deep recession here, when we bought this house we had about 30K in equity, and went ahead and got an ARM that is up next year, I drive 3 hrs to work each day, & with the price of gas, well, and we have used up all deferrments with SM, so- I think I will take your advice and call Chase bank re: the mtg terms, but moving closer to work does sound good. maybe i can find renters. What was that about SoL ?? What is that re garding SL's with Sallie Mae? What happends in rehab with st loans.? we haven't gone that far.we are on partial derferrment untill Feb 09, after that SM said adimently NO! they are not offering any suggestions, they are very cold. I told them flat out that if these payments dont change that there is noway we can pay them. SILENCE is what I got, and the same robotic words "sorry" well, thanx again. Spooky

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Sat, 20 Sep 2008 01:47:14 GMT

Also, I thought that recovery is not as bad with a foreclosure( I know it is still costly). but at least someday you can get back on your feet, where as a st loan, Its never if you default, they will hound you to your grave !, I am okay with moving, I am sure I could find a lpace cheaper before our credit tanks, before we go completly in the hole. I know there will still be cost related to the loss of our home, but I dont feel like I want to buy again for quite a while any ways. I am trying to get a better job, my husband has a great job, but now the auto co's are in trouble, I feel like just taking the road of least resistance, but I dont want to shoot myself in the foot either if i can help it, thats why I come here, for answers. TY again Spooky

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Sat, 20 Sep 2008 01:52:37 GMT

Thats 3 hrs round trip to work, sorry. 500 mi aweek to work. we could definatly live in a smaller place, no kids, goodcredit 650-675-668

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Sat, 20 Sep 2008 05:56:51 GMT

SL's private or Federal do NOT have an SOL-

Do the math-

Weight each possible decision-

Are you upside down on the mortgage?

Will renting reduce your monthly costs?

If you default on the mortgage- are you willing to NOT be a home owner for 2 th 3 years or longer?

What would happen if the SL's pulled 25% of your check in garnishment ?

Do what is best for you!!!

There are very few PRO's to your situation unless - you do what lot's of jinglle mailers are doing- living in the house for 6 months (rent free) prior to a major derog- FC.

Make a plan- do the math, you can't undo yor decition/

Re: whats worse ? foreclosure or defaulting on student loans???

thotgal320 — Mon, 22 Sep 2008 00:05:55 GMT

My sister had student loans with sallie mae and she defaulted her loans and because of that the govenment kept her tax return every year til they were paid off. I currently have loans as well and I pay every month. It's a tough situation I hope everything works out well for you.

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Mon, 22 Sep 2008 04:06:19 GMT

Were those private loans ? SM only gives out private loans, so how does the govt get involved in taking your tax returns. ? Do you have to be in complete default? We've co-signed so that would hurt my daughter as well scince they are hers primarily???? so curious!

Re: whats worse ? foreclosure or defaulting on student loans???

thotgal320 — Mon, 22 Sep 2008 05:47:14 GMT

I believe so not 100% sure though. I know she attended a university and applied for financial aid and Sallie Mae were the ones that helped her. Couple years after graduating she ran into rough times and didn't pay her loans. They went into default and when she filed her return she got a letter a few weeks later stating she wasn't getting it due to student loans ( Sallie Mae). This was about 6 years ago they kept her return things may be diiferent now not sure.

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Mon, 22 Sep 2008 21:12:46 GMT

What a hard decision!!! I can tell you that the government ended up garnishing my wages at about $400 a month for a 7K loan. I would look at the option of possibly renting out the house or getting a roomate. How about a loan modification on your mortgage? (not a re-fi)

Message Edited by nfg on 09-22-2008 02:12 PM

Re: whats worse ? foreclosure or defaulting on student loans???

californiajeff — Tue, 23 Sep 2008 18:39:32 GMT

Here's what you need to do:

Call up your Student Loans and ask for a 1 year deferement based on your current economic hardship. I have done this before. The other alternative is to go back to school. Payments can deferred indefintely while you are in school.

As for the house and mortgage, get some roommates.

Hopefully, with the above two you will have enough extra money now to cover all your bills.

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Tue, 23 Sep 2008 19:39:07 GMT

Thanks for your ideas, will they defer after using up all possible deferrments? They told me that we have used all except 6 more months of partial deferments, where we pay interest only payments. Will going back to school nuke that policy ? I am trying to encourage my daughter to go back, she is all for it except that she is afraid of it piling up even more, at some point they have to be dealt with, I think were going tp put the house up or sale in the early spring,(living here in MI-that could be next to impossible) but we'll try that anyways. TY spooky

Re: whats worse ? foreclosure or defaulting on student loans???

Anonymous — Wed, 24 Sep 2008 02:11:22 GMT

Eep? It seems like the first round of school didn't really produce a career that could pay for the resulting loans. If your daughter opts for another round, please please please do a lot of research and make sure the average starting salary will support the (big!) loan payments and that there is a decent level of demand for that position in your area/or she is open to moving where the positions are. Maybe do some cost comparisons of the schools so the debt doesn't grow so much.

Any chance the partial deferment could hold y'all till the house sells?

Message Edited by rmily on 09-23-2008 09:11 PM