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Very High Student Loans in Default

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
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Valued Contributor

Re: Very High Student Loans in Default


@coachbeau wrote:
Calyx,

How did you get out of a second defult?

The short answer:  Direct consolidation through Department of Ed.   It was predicated on a number of factors, though.
I would suggest you start making voluntary payments to your servicer/CA and then contact them.




Garden goal: Completely clean reports and a gold spade (which, at my current rate, is never going to happen...)
Message 11 of 16
Established Contributor

Re: Very High Student Loans in Default


@Sabii wrote:
Hello Kevin,
I'm sorry that this happened to you. No shame, most of us have almost been there it been there. Student Loan payments can be so unaffordable, even to those who want to pay it back. Then with interest, years pass and you've got a monstrous debt.
You mentioned 10+ years. When did the loans start, if you don't mind sharing?
I'm not a lawyer or a student loan expert but here's what I know: ignoring this debt is a very bad idea imo. The reason is this isn't simply a private loan where they would have to sue you or it would go past the SOL. These federal loans are for life. So if you refuse to make payments or get out of default (we'll talk about that in a minute), what they'll eventually end up doing is a wage garnishment (25%?), taking your tax refund each year, prevent you from buying a home, possibly taking away your profession license and/or eventually taking from your social security. Federal loans are different; many of the above methods require little to know advance notice and there doesn't need to be a lawsuit or judgement. If you choose to get out of default once they start the wage garnishment, you'll have to make the involuntary payments to rehab *and* you'll have the garnishment.
The good news is that not only is it fairly simple to use your only (a second default is forever) opportunity to get out of default. The even better news is that based in the numbers you shared, you might be in luck with affordable payment plans and as a chiropractor you should look into Public Service Loan Forgiveness and see if that's an option for you.
To get out of default, you've got to options: rehabilitation and consolidation. I'm biased. Rehabbing a loan takes many more month (9-10) but it will guarantee the removal of your default from your credit report. Your loans will get picked up by a servicer, you'll pick a payment plan and you're back in with all the Federal Loan protections. Since you have an older loan, I'd look up to see if it was a variable interest rate. If so, you could at that time consider consolidation to lock it in at least where it was. If you're going for forgiveness (I would at that loan amount), interest rate won't matter. If you consolidate while in default, you'll get out sooner but you'll be restricted to IDR plans, the default is not guaranteed to removed and it will be giving you a brand new loan, at 100% utilization. The original loan is probably one of your oldest tradelines; that too why I suggest rehabbing.
As for congress, the only thing they are remotely talking about is capping loan forgiveness and ending the program. There had also been talk about grandfathering in people already in it. I have not heard anything about Congress coming up with a solution for people in default. I would almost bet on you getting your wages garnished before this happens. Horrible suggestion to wait imo. There are numerous threads of people on here who were in default like you and overwhelmed. I have not seen one person who was unhappy to be out of default, see their credit score increasing steadily and actually get affordable payment plans. To rehab they'll either use a standard calculation of affordable payments for 9-10 month or you can have them calculate it with your income and expenses (both of which will need to be provided copies of) and hopefully come up with a lower involuntary payment. The consecutive payments must be paid on time.
As for plans, you can see about what your payments will be every month by using the the repayment estimator. It tells you about what about your monthly payments will be for the next year (ignore the upper number in the range), how long you'll be paying in the plan until possible forgiveness, how much will be forgiven including interest and principal. It's so helpful. I've also found my payments to be lower than the estimator.
Income-driven repayment plans are probably your best options. To popular ones are the newest, REPAYE, and IBR. It all depends on your marital status (REPAYE is always both incomes and both federal loans taken into account while IBR is just your income if you're married filing separately. It also has an income limit that you may exceed though).I can go into this in detail if you like but I can also provide you some links.
That's all a lot of information to process. What questions can I help you with?

Hi Sabii, thanks for your very thoughtful and well explained response to the OP.  I have a few similar questions about my defaulted student loans and don't know if I should start another post or not.  But, quickly is the rehabilitation option available to you if you've already defaulted once?  Right now CA's are recommending that I consolidate, is that my only option?  Also, who are the best servicers to work with to get default removed from credit reports?  





Message 12 of 16
Established Contributor

Re: Very High Student Loans in Default


@calyx wrote:

@Sabii wrote:
Calx: There is a way out of a second default?? Thank God! I'm trying to help someone who has half of their loans already rehabbed. The collection agency was unhelpful, so time ran out and they were garnished. I would be grateful for any information you could PM me. Thank you!

I will write it up and shoot it on over to you!   Give me a bit of time to pull it together - I have my finance journal/bujo with me, so I should be able to give a decent amount of details (I hope).


Hey Calx, can I get that information PM to me as well?  I've defaulted twice and would like to try rehabilitation again before going the consolidated route but the collection agencies are beginning to harrass me.





Message 13 of 16
Valued Contributor

Re: Very High Student Loans in Default


@tbque wrote:

@calyx wrote:

@Sabii wrote:
Calx: There is a way out of a second default?? Thank God! I'm trying to help someone who has half of their loans already rehabbed. The collection agency was unhelpful, so time ran out and they were garnished. I would be grateful for any information you could PM me. Thank you!

I will write it up and shoot it on over to you!   Give me a bit of time to pull it together - I have my finance journal/bujo with me, so I should be able to give a decent amount of details (I hope).


Hey Calx, can I get that information PM to me as well?  I've defaulted twice and would like to try rehabilitation again before going the consolidated route but the collection agencies are beginning to harrass me.


I will send you a PM, but unless you defaulted before 2008 the first time, consolidation will likely be your only option.




Garden goal: Completely clean reports and a gold spade (which, at my current rate, is never going to happen...)
Message 14 of 16
Established Contributor

Re: Very High Student Loans in Default


@calyx wrote:

@tbque wrote:

@calyx wrote:

@Sabii wrote:
Calx: There is a way out of a second default?? Thank God! I'm trying to help someone who has half of their loans already rehabbed. The collection agency was unhelpful, so time ran out and they were garnished. I would be grateful for any information you could PM me. Thank you!

I will write it up and shoot it on over to you!   Give me a bit of time to pull it together - I have my finance journal/bujo with me, so I should be able to give a decent amount of details (I hope).


Hey Calx, can I get that information PM to me as well?  I've defaulted twice and would like to try rehabilitation again before going the consolidated route but the collection agencies are beginning to harrass me.


I will send you a PM, but unless you defaulted before 2008 the first time, consolidation will likely be your only option.


Awesome, thanks.  I can't remember if it was before 2008 or if it was after. 





Message 15 of 16
Valued Contributor

Re: Very High Student Loans in Default


@tbque wrote:

@calyx wrote:

@tbque wrote:

@calyx wrote:

@Sabii wrote:
Calx: There is a way out of a second default?? Thank God! I'm trying to help someone who has half of their loans already rehabbed. The collection agency was unhelpful, so time ran out and they were garnished. I would be grateful for any information you could PM me. Thank you!

I will write it up and shoot it on over to you!   Give me a bit of time to pull it together - I have my finance journal/bujo with me, so I should be able to give a decent amount of details (I hope).


Hey Calx, can I get that information PM to me as well?  I've defaulted twice and would like to try rehabilitation again before going the consolidated route but the collection agencies are beginning to harrass me.


I will send you a PM, but unless you defaulted before 2008 the first time, consolidation will likely be your only option.


Awesome, thanks.  I can't remember if it was before 2008 or if it was after. 


Pull your file at the NSLDS, you should be able to figure it out.




Garden goal: Completely clean reports and a gold spade (which, at my current rate, is never going to happen...)
Message 16 of 16