Private Student Loan

[countrymud]

Back in 2003, I took out a student loan (stupidly), because my family told me if I didn't stay in school I'd lose my guardian (grandparents) health insurance. No one told me 'you can stay on their insurance' or 'you can apply to medicaid/medicare'. The problem is that it was a private loan.

I have been on disability now since 2005. I had been in school so the loan was deferred for that. Then I made payments as long as I could, but with the rise in cost for everything, its to the point I can't make them now. When I contacted the servicer (American Education Services), they told me that I have exhausted deferments, I have no forbearance for economic hardship left (18 months) and that my loan doesn't qualify for discharge. And the fact this is a student loan, its not like I can file for bankruptcy either.

I feel like this loan has suddenly become a giant bear trap, laid across a pit with spikes in the bottom.
I've tried calling both American Education Services, and KeyBank - both telling me theres nothing they can do.

If anyone has any ideas, suggestions, or guidance, it would be greatly appreciated right now. I don't know what to do.

 

[just1more]

Call a bankruptcy attorney. If it is a private (not government backed) loan then yes, it can likely be discharged. On the flip-side, normally private loans are not eligible for deferments or forbearance...so I'm not sure what kind of loan you actually have.

That said, if you can't pay you can't pay. We don't have debtor prisons in the US, so the worst that will happen as you will show in default if you are not already there and it will trash your credit. Don't want to be blunt, but if you have been living on disability for 7 years (ie no income) your credit score regardless of what it is isn't doing you much good.

The bigger issue is going to be to get them off your back or they will harass you till you are old and gray

 

[Aboveallislove]

Has anyone co-signed? If you can't pay, you can't pay. At some point they'll settle it for much less if you truly can't pay/have no assets. Until then you can try to find a family members/friend whose an attorney to be the contact person to stop the calls, etc. Sorry there isn't an "easy" answer--just the reality.

 

[JustDucky]

Is this a federally backed loan? Or private loan from the bank? I ask because even if you declare bankruptcy, there are some debts that can't be discharged such as taxes owed (federal or state) or student loans that are federally backed. I would consult an expert, such as a bankruptcy lawyer. Usually their first consult is free, they will give you an idea what you can or should do in your case and perhaps guide you. I have terrible credit because of disability, I had to let some bills go and prioritize what had to be paid, like rent, utilities etc.. The first thing that went were credit cards, I cut every one of them up, settled with some, others simply could not be negotiated. Unsecured debts like credit cards can be written off in bankruptcy BTW. As far as myself, once the companies realized that my income was SSDI, they didn't bother to pursue a judgement because SSDI income cannot be garnished in any way, so it would be a waste of their time and energy to go after those who are on SSDI.

I hope you get answers,
Jenn 40 wCF

 

[julie]

Are you 10000000% sure it is NOT a federally backed loan? What TYPE Of loan is it (name, subsidized/unsubsidized, parent plus...) and how much is the loan?

There is some gross misinformation listed above. Private student loans have NO discharge requirements like the federally backed ones do. I have never ever ever heard of a private student loan being discharged for disability, forgiven in a bankruptcy (they are the ONLY type of loan that can not and will not be forgiven in a bankruptcy), or reduced.

 

[JustDucky]

In the past, privately funded loans could be discharged but apparently, they aren't able to be unless there is undue hardship. Here is a link that describes this better :http://www.ehow.com/about_5286592_changes-laws-private-student-loans.html

Jenn 40 wCF

 

[draz91]

So, i have personal experience with this issue. My brother who also has CF and recently went on total disability contacted his student loan company and informed them that he can no longer work and thus for obvious reasons cannot pay the student loan. To make a long story short they sent him the paper work to start the discharge process but the CF docs don't want to fill it out because....yes, even though my brother is legally disabled and no longer works, receives federal disability checks, he could still perform minimal work if he needed to at the very basic secretary work level. That is how they get ya, on a technicality! But maybe your doctors will step up to the plate and sign the forms....its worth a shot!

 

[countrymud]

Mine is a private loan, not a Federal loan.. so its the discharge paperwork they aren't accepting. My doctors were more than willing to help me fill out the paperwork and get it submitted. :-\

 

[musclemania70]

there has to be a clause that allows for discharge if you are disabled. have an attorney look at the paperwork to go over everything you signed.

 

[coltsfan715]

I don't have nay input as far as the loan itself, but I wanted to offer a word of caution in the event that you take the advice of if you can't pay you can't pay. I work at a credit union and have seen plenty of times where people end up with garnishments on their bank accounts because they do not pay loans, be it federal or private. I would make sure that you exhaust all avenues before jumping on the "let it go to default" bandwagon. I understand how hard it can be to make it month to month, but I just wanted to put that out there as I have seen it plenty of times and would hate for you to end up in that situation.

I believe there are "disabled" clauses but I think they are very specific. I am about to go back on disability after being off it and was looking at ways of getting my student loans written off in the event that I wasn't able to pay with the decrease in income and want to say I remember something about disability being a valid reason for the loan being "forgiven" but I can't remember the specifics, that was also for a federal loan.

Best of luck,
Lindsey

 

[Aboveallislove]

Lindsey is correct that they can garnish, but if you truly can't pay, you won't have assets to "garnish" and by law they are limited by how much they can garnish from pay checks (and I don't think they care allowed to garnish from SSI/disability), even if that is "sitting" in a bank account. I have a family member who had another health issue and owed hundreds of thousands. They recognize that if you have no money/assets the cost to get the judgment isn't worth it. The CFF.org has an attorney that you can consult--maybe try to pick her brain. Frankly, it is hard to get "forgiven" of private loans. What I'd recommend is that you see if you have a family member/friend who is an attorney who will send the letter saying basically "leave him alone, send all communications to me." And then after your situation stabilizes the attorney can make an offer to settle the claims in full--that might be 4 years down the road. Obviously, without knowing all the details of the loan or your finanicial situation, it is hard to know if the above makes sense, but my thoughts for what they are worth.

 

[julie]

Countrymud, if you'd like, I would be more than happy to take a look at all your paperwork and see if I can't find a loophole somewhere? My organization has helped with this kind of stuff in the past (www.dafcf.org). I'd need you to fax or email me a copy of everything you've sent to them, and everything they've sent to you in response.

As for those saying that there "has to be a way"...I soooo wish it was that simple for you, but honestly I think you are being given a lot of false hope, unfortunately. Private loans are just that, PRIVATE and do not have to conform to any of the federal regulations. Lindsey gave some good information. And whoever said they can't garnish SSI/SSDI is incorrect because the can take directly from your bank account.

I'd be happy to try and help if you're interested.

 

[Aboveallislove]

Julie,
I was the one who said that I thought SSI/SSDI could not be garnished. It has been ages since I've worked on it, but there was a case where the bank was informed (and given proof) that the money was exempt from garnishment and I'm virtually positive it made it illegal for the bank to then garnish. I defer to your expertise, of course, but this might warrant another look.

 

[julie]

Social Security will garnish benefits:

To enforce child support or alimony obligations under 42 USC 659.
To enforce a valid garnishment for court-ordered victim restitution under 18 USC 3613.
To collect unpaid federal taxes under 26 USC 6334(c).
To have a portion of your check withheld to satisfy a current year federal income tax liability under 26 USC 3402 (P).
Other federal agencies will offset benefits to collect money from benefits to pay a non-tax debt owed to that agency according to the Debt Collection Act of 1996 (Public Law 104-134).


Debt Collection Act of 1996 (Public Law 104-134) includes privately backed student loans.

 

[Aboveallislove]

Thanks Julie. I had found the case but it involved the general rule and not the exception. Is it true, though, that the garnishment is limited to 15% of SSI?

 

[RytheStunner]

I agree with Julie. I've always been under the impression that private loans, in general, were not discharged.

 

[julie]

correct, The government can garnish 15 percent of disposable pay to collect a defaulted student loan. (Disposable pay is the same as net pay, meaning the amount of money left in your paycheck after amounts required by law, like taxes, come out. However, you are always guaranteed to be left with an amount per week that is 30 times the federal minimum wage)