Info regarding private student loans

FF

Background: My girlfriend has rather substantial debt through private school loans. (Predatory lending practices, no counseling, etc) While she is working as hard as she can to pay off her loans, I've been trying to find some information on any tricks to reduce the total of her loans. Apparently, since they're loans from a private company (and not fed loans) they can't be consolidated. I, however, just can't believe that there aren't any tricks. It seems like there's always some sort of loophole or small text that high priced lawyers always seem to be able to exploit.

I heard from somewhere (I can't remember from whom) that it may be possible to take a private loan, have it transfered to one or more credit cards and then declaring bankruptcy. I haven't been able to find any information confirming this, not to mention that it seems a bit on the shady side of ethical.

I've also been trying to find some sort of financial advisor or loan counseling in California (the more cost effective the better) but I'm not having much luck. I think I just don't know what I should be looking for.

VThornheart

If she can avoid bankruptcy, it's probably a good thing in the long run. How much is it hurting her? Is it at the point where she's having trouble paying rent/buying groceries? Can we have a ballpark figure on how much she makes per month vs. how much of it goes toward the debt? Also, if you can find out the interest rate their charging etc, it could be helpful.

Daenris

You can try to get a consolidation loan even though they're not federal loans. However it will just be another private loan and not an official "student loan consolidation loan." Her credit will determine if she's actually able to get a large enough loan at a good interest rate to pay off her student loans, but depending on the interest rate of the student loans it's worth a shot.

Otherwise, I'll echo VThornheart and say that a bit more detail about the loans in question (interest rate, monthly fee vs monthly pay) might help us make suggestions.

Thanatos

Declaring bankruptcy isn't going to help, as I don't believe you can get rid of even private student loan debt with a bankruptcy (I could be wrong on this, though).

How much are the loans, what are the interest rates, what is her income, etc....?

FF

She's not too proud of the amount so I think I only have a rough estimate...

I believe it's around 200k in debt. She's using deferments right now but she says the monthly payments will be around $1000 a month. Since her and I live together, I can take care of the rent, but at her current job she doesn't make enough a month to make her payments. (12/hr no more than 32 hours per week, she's been looking for a better job)

I don't know the interest rates.

Thanatos wrote: »

Declaring bankruptcy isn't going to help, as I don't believe you can get rid of even private student loan debt with a bankruptcy (I could be wrong on this, though).

No, you're right, bankruptcy wouldn't clear the private loan. But, the thing I heard about was that you transfer the private loan to a credit card or cards, which then would be cleared by declaring bankruptcy. That "trick" hasn't been very easy to find however, and I would imagine loan companies look out for that kind of thing.

Thanatos

I have difficulty imagining a bankruptcy court that would allow you to get away with shenanigans like that.

I also have difficulty imagining her being able to get $200,000 worth of credit when she doesn't even have a full-time job.

Daenris

Have her contact the loan company and see if they can work out a stepped payment plan. Basically she'd be paying lower payments now (sometimes just interest, though obviously it's better if she can pay at least a bit more than that) for a year or a couple, then it goes up to higher payments. Obviously this is just a delaying tactic, but if she's confident she'll have a better job within the next couple of years it may work out. And in the meantime, get her to try looking around at other lenders to see if she can find a debt consolidation loan with a better interest rate (though obviously it would be extremely difficult to find one that's going to lend her the full amount, but if she can get even part of it to a different lender with better interest she'll be better off).

Though... I suspect it's not really as much as you think it is, because 200,000 in loans should be more than a $1,000/month payment (unless 1000/month is already some kind of decreased/stepped payment, or her interest rates are actually really good). I have less total loans than that, and fairly decent interest rates, and was paying around 1000/month.

Best first step at least is to call up the lender and talk to them and see if there's anything they can do.

Jasconius

Thanatos wrote: »

I have difficulty imagining a bankruptcy court that would allow you to get away with shenanigans like that.

I also have difficulty imagining her being able to get $200,000 worth of credit when she doesn't even have a full-time job.

Pretty much this.

200k is a shit ton of debt, that's pretty amazing she was able to get that much in her name... really.

I don't know how private loans work but I know that you cannot bankrupt yourself out of federal student loans, and I would not be surprised if this law carries over to private student loans. Student loans, even the private ones, still have their special properties to them that make them unique and I wouldn't be surprised if that is one of them.

A bankruptcy isn't just a switch you flip, you have to go in front of a judge, and when the creditor presents that she got a massive line of credit, paid off all her student loans, and then went to go bankrupt the judge is going to see right through it, and I wouldn't be shocked if there were criminal charges for such a thing.

VThornheart

Holy shit, 200k in student loan debt? Ouch. Were they charging outrageous interest and it got ahead of her, or did she put the entirety of her time at a very expensive college on student loans?

Also, Jasconius is right. I imagine you could be charged with fraud for it, and it'd be pretty obvious indeed.

Do you know what her monthly payment is, and her monthly salary? Perhaps we can advise you on some severe "other parts of her life" cost cutting measures to keep her afloat and able to eat/not be homeless while she tackles this. If she has enough monthly salary coming in to handle it provided that she cuts some unnecessary spending, we can help advise you about what can be cut.

If, however, she's just plain not making enough to live... there's some other options. For example, you can go to the bank and discuss that she doesn't have the ability to pay. Often, you can get reduced rates if they're sure you wouldn't be able to pay otherwise.

FF

VThornheart wrote: »

Holy shit, 200k in student loan debt? Ouch. Were they charging outrageous interest and it got ahead of her, or did she put the entirety of her time at a very expensive college on student loans?

Also, Jasconius is right. I imagine you could be charged with fraud for it, and it'd be pretty obvious indeed.

Do you know what her monthly payment is, and her monthly salary? Perhaps we can advise you on some severe "other parts of her life" cost cutting measures to keep her afloat and able to eat/not be homeless while she tackles this. If she has enough monthly salary coming in to handle it provided that she cuts some unnecessary spending, we can help advise you about what can be cut.

If, however, she's just plain not making enough to live... there's some other options. For example, you can go to the bank and discuss that she doesn't have the ability to pay. Often, you can get reduced rates if they're sure you wouldn't be able to pay otherwise.

From what I know, pretty much her entire college career was put on the one loan, as well as her "advisor" was more of a loan dealer telling her that the way to solve any problem was to get more money on the loan. So, that plus her parents not advising her (or not knowing any more that she did about loans) and her being away from home/etc for the first time ever, equals big loan.

She indicated to me that her monthly payments will be around $1000/mo. She makes roughly that much now give or take how many hours she gets working. (Though she can't get more than 32 hours since they won't hire her on full-time). I make just enough to afford rent, food, laundry, commute, car insurance (looking into getting cheaper insurance) and the rest of the basics. We'd really like to find a bigger place (we're flat out, out of room), but that's on hold until the rental market cools down.

Mostly, this living paycheck to paycheck stuff is really starting to bring us both down emotionally. It's that overall feeling that neither of us is ever going to be able to afford to do anything with our lives. I do have some savings, and am able to save a few hundred every few months and we both have small 401k's through work.

I am trying to convince her to talk to the loan company, but she's still feeling like it won't matter, they won't do anything, she's ruined her life, etc. I am more of the mind that there has to be some other options, since I refuse to believe your entire financial life can be ruined by some assgoblin loan "advisor" pushing you to keep buying their crap.

I've just now started looking for some sort of free/low charge loan counseling or debt counseling, but what do I look for in a good one? And if there aren't any free services, what might I expect to pay for such debt/loan counseling?

DrFrylock

How much of that loan is principal and how much is interest?

VThornheart

I understand how you feel in regards to living paycheck to paycheck. If it helps at all, probably 90% of the country's in the same boat. So don't think about Bankruptcy yet... it's a much worse alternative. It's the difference between treading water and drowning yourself.

Keep treading water, once that debt is gone you guys will be doing much better... and if your combined income is allowing you to at least break even at the end of the month, you're not doing horribly. It could be better, yes, but I think many people in the forum can attest that it could be much worse. Just give it time, that's what I think.

Daenris

Yeah, I can relate. My wife and I completely live paycheck to paycheck right now. And a big cause of that is because of student loans. Whether or not she thinks it will help she needs to call the loan company and discuss options. Sure they might say "screw you, give us your money" but they also might say "well, we'd rather you pay a lower payment than default on the loan." She needs to call, be polite, and explain that she isn't able to afford living expenses in addition to the high loan payment right now.

Thanatos

So, here's the thing about paying that much in student loans: a large amount of that $1000 a month is going to be interest. You're going to need to contact the lenders, and get the paperwork the IRS needs to let you deduct it as an educational expense. What this means is that a shitload of what she pays is going to be tax-deductible. I'm going to guess she's under 25 (which is unfortunate), but she'll get hit back probably to the tune of a couple of grand come next year after tax time.

Daenris

Unfortunately only like $2500/year in student loan interest is deductible. Bastards.

amateurhour

I have private loans, lemme help out some

1) No, you can't put them on a bankruptcy, I checked into it when my rates went up for the fourth time.

2) No, they can't be consolidated or get the good rates like federal loans

private loans love to fuck you, I know this from personal experience.

does your friend work full time? if so, I reccomend she call the loan place, and offer to have it taken out of her check or put on a direct deposit on payday. This way it will be like she never even saw the money go, which will help her with budgeting, and offering to give them some kind of payment assurance usually makes them ease up on the interest. You've got to negotiate a little though, and it's by no means a guarantee.

AngelHedgie

Thanatos wrote: »

So, here's the thing about paying that much in student loans: a large amount of that $1000 a month is going to be interest. You're going to need to contact the lenders, and get the paperwork the IRS needs to let you deduct it as an educational expense. What this means is that a shitload of what she pays is going to be tax-deductible. I'm going to guess she's under 25 (which is unfortunate), but she'll get hit back probably to the tune of a couple of grand come next year after tax time.

Specifically, she'll need to fill out a W-9S form and send it to her lender (NOT the IRS!) Basically, it's an affidavit that states that the loans were taken out specifically for the purpose of funding higher education. She needs to get this in by mid-December of this year so that she'll be issued the proper 1099 by the lender next year.

Oh, and a little advice - whatever she can scrape together to put towards the principal above and beyond the payment - DO IT. If you can, you'll not only get the loan paid off faster, you'll reduce the amount that they're charging interest on - which means a smaller payment in the future. I've done this, and managed to get over $100 per payment removed from the required amount.