Dear Steve,
I went to the University of New Haven in 05 to 09. Graduated with a BA in interior design.
My father (who was unable to cosign) made "too much" for me to qualify for federal loans. So thru school I took out 130,000 in private loans thru Sallie Mae. Some of my loans have 13% interest because Sallie Mae tricked 19 year old me into believing that they would provide payment options based in what I made.
Due to the economy crash I was unable to get a job in my field but made very little in retail, about $1,200 a month, they said I had to pay $1,450 or be delinquent so I exhausted my forebearences.
Both of my parents are out of work and I moved home to pay their bills to keep the house, but my loans went into default, with interest I owe $200,000 which is insane and I can't even get married or anything because of them.
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I want to settle my debt but they don't deserve that interest from not helping make a real life payment plan for me .
Please give me some advice how to get out of my Sallie Mae debt that started at $130,000 and with interest is now at $200,000 I want to pay it back and not live with these forever! Please help!
Jenny
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Dear Jenny,
Student loan debt is a crisis in America. While your situation is tragic, it is unfortunately not all that uncommon.
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For far too long there has been a societal assumption that all debt for school is "good" debt. That was never in fact true. Debt is debt. there is no good or bad debt. It's just a future obligation paid for with money from labor and based on receiving something presently.
The issue with the massive amount of debt you incurred is a problem in the educational process. There is no point where any public or private college ever says to incoming students that their field of choice will not be able to support the cost of the degree. But it's hard to say that's the complete responsibility of the school to do that.
College financial aid offices seem to be geared more to finding loans to put student butts in seats rather than provide any sort of impartial counseling. This leaves the all important cost-benefit calculation up to the 19 year old student who is excited about going to school. Can we be surprised that turns out badly?
The level of student loan debt has left some people feeling suicidal and others fleeing the country since they can't pay. That's tragic, especially when there are some good options for dealing with student loans.
The more I study the student loan crisis the more I surprised how much incorrect information is out there about the hopelessness of student loan debt.
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I happen to be in the middle of a research project looking at how Sallie Mae debt was handled in bankruptcy adversary proceedings. These are cases that were filed at the same time as, most often, a chapter 7 bankruptcy filing. While people are under the perception student loan debt is not dischargeable in bankruptcy, that is not entirely true.
Even federal student loan debt is eliminated in some cases, see this article. The most likely people to get a discharge or reduction of their student loan debt are those who have made a good faith effort to repay their loans, have an underlying medical issue, the payments create an undue hardship, and they have a minimal lifestyle.
But one of the 2012 bankruptcy adversary proceeding cases I just looked at seems to be close to your situation.
2:12-ap-00039 - Opp"Plaintiff/Debtor attended The Art Institutes in Philadelphia from 2001 to 2003 and subsequently transferred to the University of the Arts ("U of A") from 2004 to 2007 where she received a degree in Bachelor of Fine Arts in Graphic Design.
Since graduating from the U of A, she has worked a variety of low paying jobs ranging from $10.00 an hour to $18.00 an hour.
Plaintiff/Debtor currently is employed as a Graphics Arts Associate earning approximately $41,000.00 and will most likely earn this approximate amount for the significant portion of her career.
Plaintiff/Debtor's present indebtedness on all of her student loans with the Defendants is approximately $185,000.00.
It is unlikely that Plaintiff/Debtor will be in a position to repay these loans during the duration of the repayment period. Although her financial position has improved in the few years since she incurred the loan obligations and based on the earning potential in her career field, it seems highly unlikely that her financial situation will improve to a level where she could afford to repay her loan obligation." - Source
Results
- RBS Citizen student loan $45,377 - Discharged
- Defendant National Collegiate student loan $7,162 - Discharged
"Plaintiff alleges, and National Collegiate stipulates, that repayment of the Loan would cause an undue hardship on her, the parties now stipulate:
Plaintiff's financial condition is not likely to improve.
Plaintiff has made a good faith effort to repay the Loan.
Based on the facts above, Plaintiff and National Collegiate stipulate that requiring Plaintiff to repay the Loan would impose an undue hardship on the Plaintiff, and the Loan is therefore dischargeable under 11 U.S.C. § 523(a)(8), only as to Plaintiff." - Source
- Sallie Mae owed $94,140 and reduces debt to $60,000 at 3% interest payable at $284.53 for 300 months. - Source
- RBS Citizens $37,000 is not dischargeable but will be repaid at 0% interest and at $75 per month until the $37,000 has been paid. - Source
So there is a specific example of someone who graduated with a high level of private student loan debt only to not be able to earn enough to satisfy the loan payments without having an underlying medical hardship.
And while the Sallie Mae student debt was not completely eliminated, it was settled in such a way it was made much more affordable.
There are a number of ways to deal with Sallie Mae student loans even without going through bankruptcy. But right now this is such a new area of specialized knowledge that the key though is to locate an attorney who is specifically licensed in your state who will legally represent you and has experience in dealing with these issues. These attorneys can be hard to find but you can click here to find one and talk to them about your specific situation.
Dealing with Sallie Mae private student loans is not easy, I grant you that, but with expertise and perseverance there are some options. Don't give up on this yet. It's just time to start to fight for a solution.
And last but not least, if your Sallie Mae loans have any underlying federal status, there may be some Department of Education programs that might help. Just because a loan is help by Sallie Mae does not mean some are not eligible for these special programs. For more on this, click here.
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Here is what is certain, unless we can find a way to fairly deal with your student loan situation and get you to a resolution, it will consumer your life. In my experience it is hard for those in creative fields to achieve their full potential while they are suffocating under the stress and depression of severe financial problems. It seems to crush their artistic and creative talent.
I hope my advice here can help you find a solution and lead you to a much better future.
Before I go I wanted to leave you with three easy action items you jump on right now to address your situation. Just click here.
If you have a credit or debt question you'd like to ask, just click here and ask away.
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I'd like to invite you to participate in the Get Out of Debt Guy Support Group. Everyone is welcome.
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