Strategic Student Loan Default Advice

[Anonymous]

Hello. I borrowed $60k to complete two degrees (bachelor's and masters) and finished school in 2000.  Fast forward today, the loan amount I owe is now $180k. I pay $1000/month and NONE of it goes to principal and the balance never gets lower. I am enrolled in the IBR program and the loan payment amount goes up very year more than the rate of my pay increases. I earn an ok living, but this is killing me. Last year I paid over $12k in student loan payments and it was all interest, so the loan amount is higher than when I started the year.  I have been paying on the loan for about 8 years now, after using forbearance and deferrments as long as I could. The loan is in good standing and not in default.  The loan is consolidated, via Navient, and locked in at 8.9% interest which compounds daily on the principal.

Now, my question, or need for discussion:  I was recently speaking to someone who said that there is something known as 'strategic student loan default', when I google this, of course I get nothing about the benefits of it, only that it is NEVER ok to default on student loans. The person, a lawyer, told me that sometimes it is beneficial to the borrower to do this because once the loan is in default, the lender or collection agency will be more apt to take a lump sum payment to satisfy the loan.

I was wondering the thoughts on this, if I go this route (not saying I will, I'm trying to find out if this is more advantageous for me to pay off this debt sooner) what the negative effects could be, aside from bad credit.  If I stop paying, and just bank the $1k a month I'm paying, I feasibly could have $50-60k saved to pay off the sum (which would be about 35% of the loan balance, and more than I actually borrowed).

Has anyone heard of doing this? Has any experience with it? Suggestions, comments, advice, anything is welcome at this point. I'm just exploring this as an option, I have not decided if I'm going to do anything like this, but I want to be done with this loan and have it out of my life. It is killing me and I can't keep paying $1k and more every month. It will go up next year, as my salary did, but it literally wipes away any pay increases I get, so I am stuck.

Thanks for your time and advice, it's appreciated!

[Aduke1122]

Hello im sorry OP to see you in this situation to where you would actually consider Student Loan Default , it's a **bleep** shame that just for ppl to go to school and get an education and degree we have to aquire so much debt that they can hardly make it once graduated from school .

Anyway I wanted to give you my thoughts on the whole situation as someone who has defaulted on my DL and recently Rehabbed them, once you default yes true the collection agency is more will to accept a lump sum payment for much less , BUT know that defaulting on your laons will ruin your credit for many many years . I only have one single SL that went into default in 2013 , bf my rehab it showed as 3 separate Tradelines , one that has 7 late payments of 180 days and then one collection acct , plus another from Dept of Education that says that the loan was defaulted and sent to a lawyer or collections agency . So if you are willing to have your credit trashed over getting pit of this debt , then that would be something to consider bc the only way to get even some of the negative marks from SL default off is to do the Rehabilitation Program and then that does not even remove them all.
Basically you will have to completely stop paying for your loans for 6 plus mths bf they will even be considered defaulted . Then they will garnish your wages by putting a judgment on you. So that would be another hit to your credit. Just want you to fully understand what defaulted SL means , plus they will intercept any income taxes too. But if these loans are having such a negative impact of your life then yes again they would accept a lump sum if they are in collections , but I am in NO WAY ADVISING YOU TO DO THAT . Good luck OP .

[Anonymous]

Hi,

My sister is in a similar situation.., she started here, CommonBond ,some programs and things are starting to get better! 

[Chitown2newyk]

I'm in a similar boat as well. I'm currently exploring a way to make $1000 extra a month to save and then pay off one student loan at a time. I have four separate private loans with Navient and one gigantic federal student loan in the public forgiveness program, year 1. I waited way too late to become a part of that program as well (year nine with gov.) but you live and learn.

Some loan issuers let you pay by credit card so there's a loophole that never existed. I don't think strategic default is the answer because credit is important when needed and there is no guarantee a collections agency will accept your offer. Good luck!!

[Anonymous]

What would your payment be on a 30yr extended repay? If its only a fee hundred more but a set payment it might be worth looking into.