Help! Defaulted Student Loans (and other debt fun)

[Rdskn4Lyf21]

Hey guys,

 

I'm finally at a point in life where I can start trying to get my financials straight. I did a great job ****ing things up

 

I defaulted on student loans, and I'm wondering if anyone has any experience either consolidating or going through a 3rd party to get back on track. I also have credit cards in collections, etc., and any advice there would be awesome as well. Right now I'm approaching consolidating the loans through FedLoan Servicing, but I want to keep my options open. Everything that I find through searches online looks like a scam.

 

Thanks for any help!

 

 

[codeorama]

Yes. I defaulted by accident. I didn't know that I had 11 student loans. They were all broken up. When the collection agency called and sent the paperwork to garnish my wages, which would have caused me to lose my house etc.. I wrote a letter to Mark Warner and the other senator in Va. Warner's office replied within 2 days. They wrote a letter to the department of education and within 2 weeks, my loans were consolidated.

Edited December 15, 2015 by codeorama

[The Evil Genius]

My advice, consolidate those loans (work with the company to get out of default). Then, pay off the highest interest items (usually the credit cards) as fast as possible. Still make the minimum payment to the new consolidated student loan (to avoid another default..or worse).

 

Don't add new debt to those credit cards, if you can.

 

Be frugal as possible for as long as it takes to get those credit cards to 0.

 

Then, only having a student loan to pay each month - you can live life a little easier. Sure, it sucks in the meantime. But only having rent/house payment and a student loan to pay at the end will give you some freedom.

edit.. Forgot to add..it's a little boring..but make a budget.

 

Write down how much you take home each month. Subtract out what you must pay (student loan, rent, CC minimum, other necessities (like food, etc).

 

Then start using that leftover to pay down the balances of the CC debt.  

Edited December 15, 2015 by The Evil Genius

[Koolblue13]

Have a baby, let them have it.

 

I went to tech school 20 years ago, defaulted twice because of medical issues and am just now getting it back together.

[Elessar78]

Hey guys,

 

I'm finally at a point in life where I can start trying to get my financials straight. I did a great job ****ing things up

 

I defaulted on student loans, and I'm wondering if anyone has any experience either consolidating or going through a 3rd party to get back on track. I also have credit cards in collections, etc., and any advice there would be awesome as well. Right now I'm approaching consolidating the loans through FedLoan Servicing, but I want to keep my options open. Everything that I find through searches online looks like a scam.

 

Thanks for any help!

Student loans: 

I assume by "default" this means they have been sent to a collections agency? Collection agencies are a business, so they need to make money—most of the time, they do it by purchasing debt for "pennies" (or dimes) on the dollar from the original lender. So if your orig. debt was $10,000 (principal+ interest + late fees) by the time it was sent to collections, then they probably bought it for 50 cents on the dollar (or $5,000). 

 

But the collections agency will still try to collect that original $10,000 PLUS whatever penalty they want to tack on (just for funsies). So it behooves you to negotiate down to as close to that $5,000 (you won't know this exact number) as possible. Remember as far as they know you're broke (maybe unemployed) (don't volunteer info like your work info). They're going to want to put you on a payment plan. Hold up. Negotiate your payback amount first and get this amount in writing then set up your payments based on this. 

 

Know what you owed in the first place, principal and work backwards from there. All the other amounts are "imaginary"—that's why banks charge interest because a certain percentage of loans will default anyway. 

 

Credit cards:

These are what is known as unsecured loans. A car loan they can take your car back. Same with a mortgage. My strategy, if you can't afford to pay anything on this is to let it be. What are they going to do? Ruin your credit score? Depending on how much you owe, they may take you to court, but who is going to pay a lawye $2,000 to show up for a $4,000 loan that they bought for $500? 

 

Same thing as above contact the collection agency and get your pay back amount set THEN payment plan. They'll try to pull some stunt where they try to get you to send them post-dated checks for your amount. Say you owe a thousand dollars, they'll ask for ten $100 checks up front dated each month. Don't agree to this. 

 

Other:

Don't use a third party.

Get a good book on personal finance—all of them will have the same general advice. The overall picture is you want/need to develop better habits and understanding of how money works. Go to your library and read several of them. 

[Rdskn4Lyf21]

Yes. I defaulted by accident. I didn't know that I had 11 student loans. They were all broken up. When the collection agency called and sent the paperwork to garnish my wages, which would have caused me to lose my house etc.. I wrote a letter to Mark Warner and the other senator in Va. Warner's office replied within 2 days. They wrote a letter to the department of education and within 2 weeks, my loans were consolidated.

 

I will definitely keep a senator letter in my bad pocket in case everything else goes wrong

 

My advice, consolidate those loans (work with the company to get out of default). Then, pay off the highest interest items (usually the credit cards) as fast as possible. Still make the minimum payment to the new consolidated student loan (to avoid another default..or worse).

 

edit.. Forgot to add..it's a little boring..but make a budget.

 

These are the steps I'm taking currently. I just filled out and submitted my request for consolidation, so fingers crossed there. Come January I'll be making a budget. I've been at the point for the last three years where I've been scared to because there hasn't been anything left over. Stupid reasoning, I know. So much to be said there haha. Regardless, I'm in a position now to make much better decisions, and I'll be spreadsheeting and "app"ing the hell out of a budget.

 

Have a baby, let them have it.

 

I went to tech school 20 years ago, defaulted twice because of medical issues and am just now getting it back together.

 

Do they look for any specific type of baby, or can I just go all out in the streets of South Florida and arrange them to pick up whatever results in 9 months?

 

Student loans: 

I assume by "default" this means they have been sent to a collections agency? Collection agencies are a business, so they need to make money—most of the time, they do it by purchasing debt for "pennies" (or dimes) on the dollar from the original lender. So if your orig. debt was $10,000 (principal+ interest + late fees) by the time it was sent to collections, then they probably bought it for 50 cents on the dollar (or $5,000). 

 

But the collections agency will still try to collect that original $10,000 PLUS whatever penalty they want to tack on (just for funsies). So it behooves you to negotiate down to as close to that $5,000 (you won't know this exact number) as possible. Remember as far as they know you're broke (maybe unemployed) (don't volunteer info like your work info). They're going to want to put you on a payment plan. Hold up. Negotiate your payback amount first and get this amount in writing then set up your payments based on this. 

 

Know what you owed in the first place, principal and work backwards from there. All the other amounts are "imaginary"—that's why banks charge interest because a certain percentage of loans will default anyway. 

 

Credit cards:

These are what is known as unsecured loans. A car loan they can take your car back. Same with a mortgage. My strategy, if you can't afford to pay anything on this is to let it be. What are they going to do? Ruin your credit score? Depending on how much you owe, they may take you to court, but who is going to pay a lawye $2,000 to show up for a $4,000 loan that they bought for $500? 

 

Same thing as above contact the collection agency and get your pay back amount set THEN payment plan. They'll try to pull some stunt where they try to get you to send them post-dated checks for your amount. Say you owe a thousand dollars, they'll ask for ten $100 checks up front dated each month. Don't agree to this. 

 

Other:

Don't use a third party.

Get a good book on personal finance—all of them will have the same general advice. The overall picture is you want/need to develop better habits and understanding of how money works. Go to your library and read several of them. 

 

Thanks for the advice! My idea was just that with the credit cards...let them sit until I can save up lump sums and make an offer on settling them.

 

I wish I truly understood how everything works with the student loans. I'm just another idiot who signed up at 18 because college was the thing to do. Grad school was a mistake haha. I submitted the consolidation based on income. I'm hoping I can get the payment down to something feasible and stick with it long enough to cash in on the loan forgiveness based on place of employment. Hell, a degree refund place would be awesome

[The Evil Genius]

I guess it also makes a difference on how old you are.

 

To me, I could never walk away from a debt that I owed. I wasn't raised that way - even if financially it made the most sense. Probably why my FICO is high at 40.

 

But if you are a single 24 yo knucklehead (not saying you are) and you aren't planning to marry until your 30's..then taking the hit for the CC's might make sense. Might.

 

I really can't fault anyone who does. Except for people who walk away from their homes in my area. **** them. They cause shortsales and lower than market prices for homes when I want to sell mine.

Edited December 15, 2015 by The Evil Genius

[Rdskn4Lyf21]

I guess it also makes a difference on how old you are.

 

To me, I could never walk away from a debt that I owed. I wasn't raised that way - even if financially it made the most sense. Probably why my FICO is high at 40.

 

But if you are a single 24 yo knucklehead (not saying you are) and you aren't planning to marry until your 30's..then taking the hit for the CC's might make sense. Might.

 

I really can't fault anyone who does. Except for people who walk away from their homes in my area. **** them. They cause shortsales and lower than market prices for homes when I want to sell mine.

 

I'm a single, 29 year old knucklehead

 

The idea is to pay off the credit cards one day. I'm just going to put them on the back burner until I have the means to do so. I was raised the same, so it's tough. I also saw my parents pay every bill on time and not miss a single thing for decades...only to be told to destroy their credit as the only means to get assistance in short selling a house. I couldn't go into detail there, but I'll never forget my mom cussing up a storm when they found out that doing the right thing all of those years ****ed them over.

[jpage520]

I will definitely keep a senator letter in my bad pocket in case everything else goes wrong

 

 

These are the steps I'm taking currently. I just filled out and submitted my request for consolidation, so fingers crossed there. Come January I'll be making a budget. I've been at the point for the last three years where I've been scared to because there hasn't been anything left over. Stupid reasoning, I know. So much to be said there haha. Regardless, I'm in a position now to make much better decisions, and I'll be spreadsheeting and "app"ing the hell out of a budget.

 

 

Do they look for any specific type of baby, or can I just go all out in the streets of South Florida and arrange them to pick up whatever results in 9 months?

 

 

Thanks for the advice! My idea was just that with the credit cards...let them sit until I can save up lump sums and make an offer on settling them.

 

I wish I truly understood how everything works with the student loans. I'm just another idiot who signed up at 18 because college was the thing to do. Grad school was a mistake haha. I submitted the consolidation based on income. I'm hoping I can get the payment down to something feasible and stick with it long enough to cash in on the loan forgiveness based on place of employment. Hell, a degree refund place would be awesome

 

Six figure SL debt haver here. I feel the pain man. It's awful. Right now I'm literally paying more to Navient monthly than I pay in rent. My advice is to look into whatever options may be available to you on any Federal/Dept of Ed loans first. They have Income based options that can sometimes bring your monthlys down to nothing if you're making little enough. In regards to any private loans, definitely look into consolidation, but sign up yourself. Don't buy into any of the BS stuff that gets pedaled through Facebook and Email like "Student Loan Forgiveness Support" or anything like that. Those places just charge you to do what you can do on your own. They prey on the fact that most folks in the situation are younger and won't use the tools right in front of their face provided directly by the servicer of the loan.

 

Personally, since the overwhelming majority of my loans are private since when I was a kid and signed up my parents were making too much to qualify for Gov Assistance, but not nearly enough to pay for me to go to school. I was ripe picking for Sallie Mae, and am paying for it big time now. I know it was the only way I'd get to college (I went to a specialty school), but I'd be lying if I said I wouldn't strongly reconsider if I knew what I know now. So, since I have a six figure private debt, with halfway decent interest rates, consolidation does nothing. It SUCKS lol.

 

I've heard decent things about SoFi for consolidation. You may also want to talk to someone at your bank. A lot of banks have some pretty good consolidation plans for student loans.

[Mufumonk]

These are the steps I'm taking currently. I just filled out and submitted my request for consolidation, so fingers crossed there. Come January I'll be making a budget. I've been at the point for the last three years where I've been scared to because there hasn't been anything left over. Stupid reasoning, I know. So much to be said there haha. Regardless, I'm in a position now to make much better decisions, and I'll be spreadsheeting and "app"ing the hell out of a budget.

 

 

Download this and use the 34 day trial:

 

https://www.youneedabudget.com/

 

Watch the videos here:

 

https://www.youtube.com/playlist?list=PLq0_N-XTl2yDgj59acbtGCy4Q2qHv7bt-

 

Start now.  Don't wait until January.

[s0crates]

I have some student loan debt, all Dept of Ed loans, subsidized and unsubsidized. Borrowed about 30k, but it's up close to 50k now. The ****ers wouldn't let me defer while I was still in school so I defaulted. It took a couple years after graduation before I was making enough to start paying them back.

Dept of Ed sold my loans to some collector, but I was able to rehabilitate the loan by making 9 consecutive income based payments (while accruing interest daily). Just finished the rehab and got my first statement from the DoE, don't know how that will go yet. I'll see.

I'd also be open to any advice.

Edited December 16, 2015 by s0crates

[dchogs]

this is what dave ramsey does. do yourself a favor and visit:

www.daveramsey.com

www.everydollar.com (dave's online budgeting tool)

you can listen to dave's radio show on iheart radio, tunein radio, or he has an app. read his book: the total money makeover.

his plan in a nutshell:

(prelude: create a zero based budget, where every dollar coming in has a specific place to go)

1. save a $1000 mini emergency fund

2. debt snowball (list debts in order from smallest amount to largest amount, and pay them in that order while paying minimum payments on all)

3. save your emergency fund: 3-6 months of expenses

4. invest 15% of income

5. college fund for kid(s)

6. pay off house

7. save your face off now that you don't have any payments at all.

don't do #2 until you do #1; don't do #4 until you do #3; etc.

you're going to have to really cut things waaaaaayyyyyy back, but it can be done.

[Mufumonk]

www.everydollar.com (dave's online budgeting tool)

 

 

Here's a pretty good comparison of EveryDollar and YNAB:

 

http://alextran.org/ynab-vs-everydollar/

[Elessar78]

Never tried YNAB and trying Everydollar after seeing it here. I've developed my own spreadsheet system but I'm always on the lookout for an app that's viable. Everydollar, seems to work pretty well and the sync up with your accounts should be worth it and easy. 

 

Hundred bucks a year seems steep for something I've done successfully without—but what I've always lacked is the ability to track by category in a good way. I've tried mint and my bank's app, but it's weak. 

[dchogs]

Never tried YNAB and trying Everydollar after seeing it here. I've developed my own spreadsheet system but I'm always on the lookout for an app that's viable. Everydollar, seems to work pretty well and the sync up with your accounts should be worth it and easy.

Hundred bucks a year seems steep for something I've done successfully without—but what I've always lacked is the ability to track by category in a good way. I've tried mint and my bank's app, but it's weak.

The synching with your bank account in real time is what costs money. We don't use that feature so it is free for us.

[dchogs]

Here's a pretty good comparison of EveryDollar and YNAB:

http://alextran.org/ynab-vs-everydollar/

1. Use what you like, as long as you budget. Legal pad, napkin, YNAB, whatever.

2. When i was looking for a budgeting tool, I didn't want to drop $60, so that prevented me from trying it.

3. The review is from the perspective of a long time YNAB user... what he thinks is easier in YNAB an ED user might find more difficult (and there are absolutely reoccurring transaction options each month for regular bills. All you do is click on the next month, and it starts with your last month's budget. That being said, that can be annoying too.). ED would have had to be massively better to get the guy to switch just to overcome his natural bias. ED is far easier to set up from what the videos show.

4. Use what you like, as long as you budget, and stick with it.

[Elessar78]

And, at least for me, budgets are organic things—you can be strict and never change or it can change (slightly) month to month depending on expenses and how far out you project. The main idea is to not spend more than you make, and when you see it getting close to the edge to hit the spending brakes. 

 

Also if you blow your budget one month, don't throw it out the window. It's a plan, just keep working the plan as best you can—overtime you'll get better at sticking with it. It's a skill that you can develop.

[RedBeast]

Credit Cards...transfer to a no interest card for 18 to 21 months. Might cost 0% to 3% of the balance, but you can pay down the principal. Than do it again later if you need to. The minimal transfer percentage will be a month or two of your minimum payment.

I do budgeting by excel and online (no more quicken for me)...except investing and have custom software for that

Edited December 16, 2015 by RedBeast

[The Sisko]

Yes. I defaulted by accident. I didn't know that I had 11 student loans. They were all broken up. When the collection agency called and sent the paperwork to garnish my wages, which would have caused me to lose my house etc.. I wrote a letter to Mark Warner and the other senator in Va. Warner's office replied within 2 days. They wrote a letter to the department of education and within 2 weeks, my loans were consolidated.

This is excellent advice. I didn't default on my loans but Sallie Mae screwed up my consolidation so badly that I was close to it on one. Long story short, they got the wrong payoff on one of them so it was left outstanding and I was making payments on that last loan in addition to my consolidation loan. I called and wrote them over and over again for months without any results. I was about to just stop paying the one that was left over when we got a new staff member at my job who'd been some muckety muck at Sallie Mae. I mentioned the issue and she said it happened all the time and that they really didn't care. She gave me the number of a VP or some such and within a day of talking with his assistant a fix was in the works when months of calling and writing them before that got me bupkis. So if they screw something up, having someone who matters (unlike us unwashed masses) to give 'em the business helps.

[jpage520]

This is excellent advice. I didn't default on my loans but Sallie Mae screwed up my consolidation so badly that I was close to it on one. Long story short, they got the wrong payoff on one of them so it was left outstanding and I was making payments on that last loan in addition to my consolidation loan. I called and wrote them over and over again for months without any results. I was about to just stop paying the one that was left over when we got a new staff member at my job who'd been some muckety muck at Sallie Mae. I mentioned the issue and she said it happened all the time and that they really didn't care. She gave me the number of a VP or some such and within a day of talking with his assistant a fix was in the works when months of calling and writing them before that got me bupkis. So if they screw something up, having someone who matters (unlike us unwashed masses) to give 'em the business helps.

 

This is one of the biggest issues that I have with Sallie Mae and Navient. Their customer service is AWFUL. It's an absolute nightmare trying to get something done through them. You never talk to the same person. Ever. Only time I did was literally getting the person's name and calling over three times until someone directed me to her line. I've heard numerous stories just like mine with getting in touch and like yours with poor file management and the like.

 

But, miss a payment and see what happens lol. Be a week late on a payment and see if they're at all hard to get in touch with. About five days past the due date and it's a lock that you'll have them calling you and your co-signer(if applicable) over and over and over again from morning to night.

[PleaseBlitz]

I just freed myself from FedLoan Servicing.  **** them.  If I could make one company a real person for a day, and then spend that day elbowing them in the ****ing face, it would be FLS.  Despite their best attempts to prevent it (by not sending me the documentation that I needed (and they are required by law to provide)), i finally refinanced with SoFi.  

 

My rate went from between 6.5% and 7.6% depending on the loan (i had 9) to 3.105%.  The difference that makes is crazy. Before, like 85% of each payment went to interest, now 2/3 goes to principal.  AND SOFI SENT ME A PIE.  Seriously, it was a bourbon pecan pie.  From here:  http://threebabesbakeshop.com/product/bourbon-pecan-pie/.  I don't even like pie, but it's a nice gesture that makes me not want to elbow them in the face.  

Also, if your servicer is giving you problems, the best place to lodge a complaint is with the CFPB.  

 

http://www.consumerfinance.gov/blog/category/student-loans/

 

And they are definitely focusing on this issue.

 

http://www.consumerfinance.gov/newsroom/cfpb-concerned-about-widespread-servicing-failures-reported-by-student-loan-borrowers/

Edited December 17, 2015 by PleaseBlitz

[GoSkins0721]

I just freed myself from FedLoan Servicing.  **** them.  If I could make one company a real person for a day, and then spend that day elbowing them in the ****ing face, it would be FLS.  Despite their best attempts to prevent it (by not sending me the documentation that I needed (and they are required by law to provide)), i finally refinanced with SoFi.  

 

My rate went from between 6.5% and 7.6% depending on the loan (i had 9) to 3.105%.  The difference that makes is crazy. Before, like 85% of each payment went to interest, now 2/3 goes to principal.  AND SOFI SENT ME A PIE.  Seriously, it was a bourbon pecan pie.  From here:  http://threebabesbakeshop.com/product/bourbon-pecan-pie/.  I don't even like pie, but it's a nice gesture that makes me not want to elbow them in the face.  

Also, if your servicer is giving you problems, the best place to lodge a complaint is with the CFPB.  

 

http://www.consumerfinance.gov/blog/category/student-loans/

 

And they are definitely focusing on this issue.

 

http://www.consumerfinance.gov/newsroom/cfpb-concerned-about-widespread-servicing-failures-reported-by-student-loan-borrowers/

Interesting. I'm in the process of helping my son get his SL straightened out so he can start to repay them. For all of 2015, he has been successful in getting the Fed to charge him $0.00/month because he wasn't making enough money. He just started a new, full-time job where he will now be able to start making payments. 

 

You obviously have been happy with SOFI. Any tips on doing the conversion to them? Is it a pretty straight forward process? How long did it take to convert?

[SkinsHokieFan]

sofi.com has great consolidation options.

 

I don't have much left in student loans however was still on a long plan to pay them off.

 

I just re-financed/consolidated them to get them paid off in 5 years (as opposed to 74 months) with a lower rate. Luckily I am at a point financially where I can pay extra per month and probably get it done in 4 years

 

As for the rest of your issues, in particular with credit cards.

 

1) Absolutely set a budget. And that budget has to start with "paying yourself first" i.e pay down as much as you can in debt first, next save and whatever is left over you spend

 

2) Do yourself a favor and purchase a monthly monitoring subscription to 1 of the 3 credit bureaus. I monitor my credit through equifax and am obsessed with my debt and score. Just knowing what it is everyday keeps me in check.

 

3) Trust me when i say it is not hopeless if you have plan, budget and stick to it. Believe it or not you could be debt free much sooner then you imagine. 

 

4) One day credit cards become fun when you have a high credit score. By utilizing them correctly you won't be paying full price for plane tickets or hotels and you'll get some cash back every month. 

 

5) My own personal story was my credit sucked a few years ago and now I am in excellent credit shape with all 3 reporting agencies. 

I just freed myself from FedLoan Servicing.  **** them.  If I could make one company a real person for a day, and then spend that day elbowing them in the ****ing face, it would be FLS.  Despite their best attempts to prevent it (by not sending me the documentation that I needed (and they are required by law to provide)), i finally refinanced with SoFi.  

 

My rate went from between 6.5% and 7.6% depending on the loan (i had 9) to 3.105%.  The difference that makes is crazy. Before, like 85% of each payment went to interest, now 2/3 goes to principal.  AND SOFI SENT ME A PIE.  Seriously, it was a bourbon pecan pie.  From here:  http://threebabesbakeshop.com/product/bourbon-pecan-pie/.  I don't even like pie, but it's a nice gesture that makes me not want to elbow them in the face.  

Also, if your servicer is giving you problems, the best place to lodge a complaint is with the CFPB.  

 

http://www.consumerfinance.gov/blog/category/student-loans/

 

And they are definitely focusing on this issue.

 

http://www.consumerfinance.gov/newsroom/cfpb-concerned-about-widespread-servicing-failures-reported-by-student-loan-borrowers/

 

Great stuff here.

 

And yea, SOFI was so easy. 60 months (hopefully 48 months) and these student loans will be gone. 

Edited December 18, 2015 by SkinsHokieFan

[rictus58]

this is what dave ramsey does. do yourself a favor and visit:

www.daveramsey.com

www.everydollar.com (dave's online budgeting tool)

you can listen to dave's radio show on iheart radio, tunein radio, or he has an app. read his book: the total money makeover.

his plan in a nutshell:

(prelude: create a zero based budget, where every dollar coming in has a specific place to go)

1. save a $1000 mini emergency fund

2. debt snowball (list debts in order from smallest amount to largest amount, and pay them in that order while paying minimum payments on all)

3. save your emergency fund: 3-6 months of expenses

4. invest 15% of income

5. college fund for kid(s)

6. pay off house

7. save your face off now that you don't have any payments at all.

don't do #2 until you do #1; don't do #4 until you do #3; etc.

you're going to have to really cut things waaaaaayyyyyy back, but it can be done.

Dave Ramsey offers a lot of good advice. With the Exception of Debt Snowballing. That's simply a feel good measure for people who feel bad about their situation. Your first order of business should be paying off which ever debt is costing you the most. Which means going after loans with the highest APR first.

[skinsmarydu]

I've never had student loan debt (duh, I'm a bartender/server, LOL), and have paid cold hard cash for most stuff in my life.  If I didn't have it in my pocket, it didn't exist.

That's how you've gotta get down to things.  DO NOT buy groceries for the week unless you have plans for them.  Spend some time every day or every other day buying your food TO COOK.  Don't eat out.  I can tell you that honestly.  It will kill your plans to get ahead.

I'm not kidding.  Plan meals, even if it's Ham Helper, use your leftovers.  Find something to do with everything in your kitchen.  Keeping the big things (food) small will help you.

~My mother hates that I never had a job that had "benefits"...I never had kids, so eating free kept me out of her apron, so to speak.  Store brand peanuts are just as good, etc.  Get small things manageable, and the big things get smaller.~