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Started By
Message
Trying to resolve Student Loans that are in default...
Posted on 2/17/16 at 6:09 pm
Posted on 2/17/16 at 6:09 pm
Long story short, my wife and I have learned that my brother in law has turned into a Heroin addict at almost 35 years of age. His wife has left him and filed for divorce and sole custody of his kids. It's a terrible situation so I'd appreciate if any judgmental comments are kept to a minimum. I am well aware that I'm never going to be repaid and I'm more than likely just pissing any money we give him away. He's lucky enough to have a family that will be pooling together to get him back on his feet.
With that out of the way, I've run his credit report to see just how bad the damage is and it's clear he hasn't dug too deep a hole if he can turn his life around now. There are 2 Federal Student Loans that total about $15k that are in default and looks like they have been in Collections for a few years. I've never dealt with anything like this before so I'm not real sure where to turn. Declaring bankruptcy isn't an option even if that would get the loans forgiven. I'm leery of contacting the collections companies that are reporting the loans because they all seem shady as frick and I doubt they'll offer the best solution for him. Should I contact a Bankruptcy Attorney? Are there any programs available that we could apply for that would get these loans back on track?
Bottom line is we are trying to help him as much as we can with as little exposure as possible and his hole is exponentially deeper with a 580 credit score. Any advice would be greatly appreciated.
With that out of the way, I've run his credit report to see just how bad the damage is and it's clear he hasn't dug too deep a hole if he can turn his life around now. There are 2 Federal Student Loans that total about $15k that are in default and looks like they have been in Collections for a few years. I've never dealt with anything like this before so I'm not real sure where to turn. Declaring bankruptcy isn't an option even if that would get the loans forgiven. I'm leery of contacting the collections companies that are reporting the loans because they all seem shady as frick and I doubt they'll offer the best solution for him. Should I contact a Bankruptcy Attorney? Are there any programs available that we could apply for that would get these loans back on track?
Bottom line is we are trying to help him as much as we can with as little exposure as possible and his hole is exponentially deeper with a 580 credit score. Any advice would be greatly appreciated.
5
Posted on 2/17/16 at 6:14 pm to Canard Noir
quote:
bankruptcy isn't an option even if that would get the loans forgiven.
quote:
Should I contact a Bankruptcy Attorney?
Can't discharge student loans through bankruptcy
I have no advice other than that. Never dealt with collections or student loans but I wish you luck dealing with this.
I will say I have dealt with addicts and don't be upset when you help him out and he falls back down again in weeks, months, or years. The only addicts I have ever seen recover are the ones that hit absolute rock bottom and decide they no longer want to live like that. In order for a few of them to get to that point, the families had to stop helping them and shut them out.
Posted on 2/17/16 at 6:20 pm to Canard Noir
He can have the loans go through a "rehabilitation program" which I believe is 12'months on a payment plan after which if you have not been late the loans will be taken out of default.
Then he will just need to stay on top of payments. He could get on an income based repayment plan to lower monthly notes
Then he will just need to stay on top of payments. He could get on an income based repayment plan to lower monthly notes
Posted on 2/17/16 at 6:28 pm to stout
Stout, yes, I am aware they can't be forgiven but I was considering whether a Bankruptcy specialist would be prudent regardless.
We are also expecting to be disappointed but I think every family that has an ounce of love and means in it would be remiss if they didn't help as much as possible the first time through it.
We are also expecting to be disappointed but I think every family that has an ounce of love and means in it would be remiss if they didn't help as much as possible the first time through it.
Posted on 2/17/16 at 6:32 pm to nahtanojc
I've done a little searching on the Internet and I've seen this but at first glance it's unclear how to actually apply for this. I'm going to dig further because I imagine this is the way to go but I was hoping to hear someone had a first hand experience with rectifying similar loans.
eta: I also guess the Money Board is likely not the best place for this because the people here are more likely to be smarter than to be in this position. The OT would be more likely to find someone with experience but I really don't want to wade through the crap I'd get there...
eta: I also guess the Money Board is likely not the best place for this because the people here are more likely to be smarter than to be in this position. The OT would be more likely to find someone with experience but I really don't want to wade through the crap I'd get there...
This post was edited on 2/17/16 at 6:47 pm
Posted on 2/17/16 at 6:32 pm to Canard Noir
quote:
We are also expecting to be disappointed but I think every family that has an ounce of love and means in it would be remiss if they didn't help as much as possible the first time through it.
I agree. It's just so soul crushing when a relapse happens.
Posted on 2/17/16 at 6:40 pm to stout
quote:
I agree. It's just so soul crushing when a relapse happens.
And that is very much the reality of the situation. His kids' are very much a part of our lives and I'm largely justifying my financial assistance because they are and will suffer for the decisions of his changed mind.
Posted on 2/17/16 at 6:50 pm to Canard Noir
File for a student loan deferment immediately. This will be good for 12 months. I did this first out of college. By design it is for those grads trying to get on their feet after college but I believe everyone is entitled to one regardless of age.
LINK
quote:
Under certain circumstances, you can receive a deferment or forbearance that allows you to temporarily postpone or reduce your federal student loan payments. Postponing or reducing your payments may help you avoid default. You’ll need to work with your loan servicer to apply for deferment or forbearance; and be sure to keep making payments on your loan until the deferment or forbearance is in place.
LINK
This post was edited on 2/17/16 at 6:52 pm
Posted on 2/17/16 at 6:50 pm to Canard Noir
You're a good dude and I wish you and everyone involved the best outcome.
Posted on 2/17/16 at 7:01 pm to Rhino5
Rhino, that looks like an option for loans that aren't yet in default and these are, very much so. Am I missing something?
Posted on 2/17/16 at 7:03 pm to Canard Noir
quote:
I've done a little searching on the Internet and I've seen this but at first glance it's unclear how to actually apply for this. I
I've had to do it. I was young and stupid (at least a little more stupid than I am now!) and allowed my loans to go into default. Once there, loan rehabilitation is the only way to get them out, but the process itself is painless enough. I had to setup a payment plan (can't remember if it was 12 or24 months) and pay a nice sized payment every month. After I made all the qualifying payments, they came out of default and were sold to another agency and were then current loans. The accounts remain on your credit report but are marked as "paid" after they are out of rehab, so it doesn't hurt.
Regarding deferment: if they are close to being in default but are not yet there, this is the best option. They can backdate when the deferment goes into effect. Don't think this is an option after they are placed in default though...
Good luck
Posted on 2/17/16 at 7:06 pm to Canard Noir
How far in default? It may only be a few hundred bucks to become current and then apply for deferment.
Default usually happens after no payment of any sort has been going on for a few months. A $15k student loan should have a relatively low payment. I'm betting under $1000 paid to the lender would get you current then apply for deferment.
Default usually happens after no payment of any sort has been going on for a few months. A $15k student loan should have a relatively low payment. I'm betting under $1000 paid to the lender would get you current then apply for deferment.
This post was edited on 2/17/16 at 7:09 pm
Posted on 2/17/16 at 7:12 pm to nahtanojc
Thanks, I will be giving this due diligence in the next few days. Just a couple questions, who did you submit the application to? Do you know if you can have multiple loans/ types of loans in this program? It looks like it's a one shot deal and unclear whether you can consolidate multiple debts.
Posted on 2/17/16 at 7:18 pm to Canard Noir
Go post this same question on r/studentloans and/or r/personalfinance.
I've read a few different posts on those boards from people with defaulted student loans that successfully negotiated with the creditors and worked out a deal for a significant discount (I seem to remember something like 40%) off the total amount owed by offering to pay in full.
To me, you would have even more leverage negotiating for your brother than the typical borrower trying to negotiate on his own behalf because you personally don't owe them anything and can walk away if they don't give you the deal you want. If it were me, I'd definitaly be sure to tell the creditor the full details of your brother's current situation (and maybe even embellish a bit). That should make them realize that the prospect of recovering from him are slim to none (if the past few years of nonpayment hasn't already), which makes your offer a lot more enticing.
Definitely don't contact the creditors and offer any payment plan before looking into settling the debt for a discount first.
I've read a few different posts on those boards from people with defaulted student loans that successfully negotiated with the creditors and worked out a deal for a significant discount (I seem to remember something like 40%) off the total amount owed by offering to pay in full.
To me, you would have even more leverage negotiating for your brother than the typical borrower trying to negotiate on his own behalf because you personally don't owe them anything and can walk away if they don't give you the deal you want. If it were me, I'd definitaly be sure to tell the creditor the full details of your brother's current situation (and maybe even embellish a bit). That should make them realize that the prospect of recovering from him are slim to none (if the past few years of nonpayment hasn't already), which makes your offer a lot more enticing.
Definitely don't contact the creditors and offer any payment plan before looking into settling the debt for a discount first.
This post was edited on 2/17/16 at 7:20 pm
Posted on 2/17/16 at 7:21 pm to williejameshuft
quote:
s on those boards from people with defaulted student loans that successfully negotiated with the creditors and worked out a deal for a significant discount (I seem to remember something like 40%) off the total amount owed by offering to
This most likely destroys your credit score, but yeah if in default already why not.
Posted on 2/17/16 at 7:28 pm to Rhino5
What credit score ... the dude's loans have been in collections for a few years
Shoot, while you're at it, you can even try to negotiate to have the creditors take some post-hoc curative actions to HELP your brother's credit.
I'm no expert in credit issues but am pretty sure there are a number of ways a creditor can begin the repair process if they want to.
Shoot, while you're at it, you can even try to negotiate to have the creditors take some post-hoc curative actions to HELP your brother's credit.
I'm no expert in credit issues but am pretty sure there are a number of ways a creditor can begin the repair process if they want to.
This post was edited on 2/17/16 at 7:29 pm
Posted on 2/17/16 at 7:31 pm to williejameshuft
I've thought this might be a way forward but I'm hesitant because he has other obligations and this is supposed to be something that rights the ship so he can take over the payments himself eventually. I'd also imagine that settling the debt for less than the full amount would hurt his credit for several years more than just getting them in good standing. Don't you think?
Posted on 2/17/16 at 8:05 pm to Canard Noir
I honestly have no idea what type of long-term impact it would have. I'm sure you'll find that answer if you look into it though. I was just trying to offer an alternative proposal for the situation.
Hope everything works out for you and your family.
Hope everything works out for you and your family.
Posted on 2/17/16 at 10:20 pm to williejameshuft
Thank you, clearly I've got some work ahead of me to decide what is best.
For everyone who's been in this kind of position, I feel for you and I'm realizing how much it sucks. I feel like we can do nothing right because too much charity is enabling and too little is likely a death sentence. It truly, truly sucks in every sense and I'm in disbelief how obtuse I was to others who've done this before me.
For everyone who's been in this kind of position, I feel for you and I'm realizing how much it sucks. I feel like we can do nothing right because too much charity is enabling and too little is likely a death sentence. It truly, truly sucks in every sense and I'm in disbelief how obtuse I was to others who've done this before me.
Posted on 2/18/16 at 10:31 am to Canard Noir
Personally been thru this situation with a loved one that had addiction problems.
The best course of action is not to worry about his bills. If you want to help financially, help support his wife and kids or help with the cost of rehab if he is willing to go.
You could spend thousands getting his bills current and he relapse (highly likely) and then the bills will all be in default again.
A person has to accept their addiction and be willing to pull themselves out of the hole.
All you can do is love that person and help his wife and kids.
The best course of action is not to worry about his bills. If you want to help financially, help support his wife and kids or help with the cost of rehab if he is willing to go.
You could spend thousands getting his bills current and he relapse (highly likely) and then the bills will all be in default again.
A person has to accept their addiction and be willing to pull themselves out of the hole.
All you can do is love that person and help his wife and kids.
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