Strategic default in NC on 80K worth of private loans?
Posted by 1thatoneguy@reddit | studentloandefaulters | View on Reddit | 37 comments
Hey everyone.
I really hate that it's gotten to this but I wasn't sure where to go. My wife has $80,000 worth of federal student loans that only seem to go up no matter how hard we try. We found out that North Carolina is one of the states that can't garnish and thought it might be a lifeline.
Currently, wife makes 60K/yr, and has an 800 credit score with 80K in federal loans. Our idea was to refinance them or get a private loan and make payments for a bit before strategically defaulting.
We have no assets in her name, only use my bank accounts, and have no need to rely on her credit for the foreseeable future. Is this a really bad idea? Someone talk me out of it please. Just not sure what else to do.
Thanks all!
brotatochip4u@reddit
You can't fuck with federal loans! There is no strategic default here I'm sorry to tell you this. They will garnish your paychecks, tax returns, and offset your social security when it comes time to collect.
1thatoneguy@reddit (OP)
No worries, and I appreciate your comment! So the plan would be to refinance her 80K fed loans to private loans before defaulting. And if that doesn't work leverage her good credit and take out a personal loan to do the same.
brotatochip4u@reddit
Sorry kind of just skimmed your post I guess. That sounds like a strategic default to me! Good luck on your endeavors and I would just make sure that your wife doesn't have any assets moving forward.
1thatoneguy@reddit (OP)
Got it, thanks so much. Appreciate you chiming in. Yep, just here looking for any final thoughts on things we may be missing. Our house is in my name only and we have no other assets.
laustef84@reddit
I think it’s hilarious the people on here getting their knickers in a twist over you and your wife “defrauding” the lender. I actually laughed out loud. Report back to the rest of us sheeple. I will be working one of my 3 jobs where almost 40% of my gross is taken by elected criminals in Taxachusetts yet our roads, public transit and city in general is a MESS. I would 100% do the same if I wasn’t already having my wages garnished from my full time job garnished :( it’s too bad I make too much ON PAPER for any assistance even though my take home pay puts me in the 60% of area median income (or in other words extremely low income) thinking about quitting my job, getting knocked up a few times by different deadbeat Dads and picking up a moderate fentanyl/crack habit on the weekends…then I’ll get housing, food stamps, free chillcare, mass health….ahhhh the good life!! We need to burn it all down. Good luck to you and your wife from Boston!!
morbie5@reddit
If you are on an IDR plan that is what happens. You then get forgiveness after paying for 10/20/25/30 years
That is for private debts, not federal student loans
If they think your goal was to refi to private so you can strategically default you could potentially get charged with fraud fyi. I don't know how likely that would be but it is possible.
How long have you been paying on these federal loans and what repayment plan is she on?
1thatoneguy@reddit (OP)
That makes sense. Thank you for the info! She has been paying around 5 or 6 years. I think she was on standard, then IDR, now SAVE, but we heard that is going away. All 80K is in undergrad student loans.
Yes, her plan is to roll fed loans into private student loans or a loan first, pay for 6-12 months and then default. She has like 800 credit and decent income so assuming she won't have trouble getting one.
I mean I guess. But I heard in NC they often dont try very hard to collect because laws make it tricky, Im hoping they will just sell to debt collection. They would have to prove why she stopped paying a year in, and as long as we dont do anything obvious like shift money, etc. She has no assets and we use my accounts for everything.
Appreciate you taking the time to share your thoughts! Thank you very much.
morbie5@reddit
This is a very bad idea tbf. Strategic default is usually the last resort. What is your income?
They can still try a bank levy even in wage garnishment for private debts isn't allowed
True but then you have just paid for a year and wasted all that money only to then destroy her credit
1thatoneguy@reddit (OP)
She has zero bank accounts with cash sitting and we have no joint accounts or assets. Her credit means nothing we are happily married with emergency savings and my credit if anything goes wrong. Her credit coming back up in 5-10 years after default is completely fine.
I fail to see how this is a bad idea. Whats the alternative? Trying to aggressively pay a balance that's only going to keep going up due to interest thanks to the discontinuation of the SAVE plan? Sure I could keep kicking the can down the road, hoping for legislative changes, or I can just do something about it that has an extremely low chance of backfiring.
And even if it does, what's the worst that happens? We are already straddled with this debt in the first place, what they add an extra 10 to 20,000 to it an interest? Oh I'm so scared, haha.
morbie5@reddit
Her paycheck doesn't go into her bank account?
You don't think committing fraud is a bad idea, even if you don't get convicted of it? This is fraud, that is not in dispute. The only dispute is will you all be able to get away with it
The RAP plan has an interest cap
1thatoneguy@reddit (OP)
No, they go into my account, which is not joint. Wait, we are supposed to feel bad for those that have preyed on literal generations of students? I'm confused. Don't worry, I'll update and message ya in a year or two when everything is wrapped up.
morbie5@reddit
Not all banks allow direct deposits into an account where the names mismatch. Your bank could always change policy if that is what you all are doing. I suppose you could have her sign a physical check over to you
The federal government loses money on the federal student loan program so one could argue that it is the other way around
As to private student loans, for-profit lenders have only been in the private student loan business since around 2005 in any meaningful way, so hardly 'generations of students'
I'm not worried, you can do as you please. I am a bit curious to see how this turns out tho so I'll set a reminder and ask, but you can update me if you want
1thatoneguy@reddit (OP)
The U.S. built a system where the cost of college was pushed onto teenagers and then made the resulting debt unusually hard to escape. Literal children are still encouraged to sign for life-altering loans before they can even legally rent a car, with interest capitalizing, limited bankruptcy protections, and aggressive servicing practices.
Meanwhile most developed countries heavily subsidized tuition or kept costs low enough that students didn’t need decades of debt to get a degree. The U.S. went the other direction: more cost shifted to households, more reliance on loans, and more room for lenders and servicers to profit off repayment friction.
Acting like any of this is ordinary policy rather than systemic exploitation is just willful ignorance. At this point, its hardly finances, its mostly principle. I'll see to it she never pays a penny of this.
morbie5@reddit
Compared to you I am
That doesn't mean your bank won't change policy one day.
If you want your wife to potentially be unbanked for 10 to 20 years (in my state that is how long a judgement can potentially last) then you do you.
Being unbanked is a real world problem lol
Teenagers can only borrow up to like 30k in federal loans in most cases. Any thing more would almost certainly require a cosigner (for private loans) or a parent to take out parent plus loans.
In most of those countries getting accepted into college in a lot more difficult. Apples and oranges comparison.
morbie5@reddit
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jonsonmac@reddit
Getting a loan with no intention of paying would be considered fraud. If you default a year after getting an $80k loan, I bet they would be inclined to file a lawsuit against you.
1thatoneguy@reddit (OP)
Of course they will win in court. But in NC, she is judgement proof as they cannot garnish wages and she has no assets. As far as fraud, there is a 100% chance they will never be able to prove that. Shes one of thousands taking out loans that somewhere along the lines will have trouble paying it off. I doubt we could find a single person this has happened to that didnt make an obvious mistake. As long as she doesnt falsify any applications, people stop paying loans every day, they can't do anything.
jonsonmac@reddit
Skipping out on a $200 payday loan is different than taking an unsecured loan for $80k with the intention of defaulting. That's fraud, and the lender will likely not let that go easily. You could end up with criminal charges, depending on your state. And don't try filing bankruptcy, the trustee will surely scrutinize your new loan.
1thatoneguy@reddit (OP)
Yeah, that 100% won't happen. I personally know 5+ people that have done similar things with far more money and nothing happened. Why do you think I'm here considering it? Do you think I'm on here having done no research? Like I said, would love to see a single story saying otherwise, if you can find one pursued as fraud, please do share. The lender will 100% let it go especially in states of NC/PA/SC/TX. What do we think this is, the FBI? Its a private loan, not a lien. Its no one's business how borrowers choose to spend their money. Every single day people wake up and say I'm not going to pay anymore because of x, y, z, thats life. Unless they prove it which they can't (literal thousands of people refi fed to private everyday), there's not a single thing they can do.
morbie5@reddit
No such thing as 100% certainty with something like this
I'm not going to pretend to be a lawyer but the lender could notify local authorities or the court to try to get her charged with fraud. How likely that is tho, idk
1thatoneguy@reddit (OP)
There is 100% certainty. Find me a single case where they proved fraud in this exact situation. It would take an act from God himself to get even close to trying to prove anything. She's simply refinancing her loans, which thousands do, and at some point she's going to struggle to pay them off, which thousands do. I'd love to hear even a single rational theory where this could not work out. Haha.
morbie5@reddit
No there isn't
'Proved fraud' and 'getting charged with fraud' (or even 'getting investigated for fraud but not charged') are not the same thing.
1thatoneguy@reddit (OP)
I mean in the absence of evidence, one can infer. Like I said find me a single post or article anywhere that even loosely references proven fraud OR fraud investigation for simply taking out a small private loan and defaulting without something obvious like a failed business venture, etc.
morbie5@reddit
Have you actually looked for evidence besides a quick google search? Have you done an exhaustive search thru your state's court records?
The police don't publish an article on the internet every time they investigate someone so not being able to dig up such an article wouldn't prove anything.
Racking up a bunch of credit card debt and then filing for bankruptcy is bankruptcy fraud and people have been investigated over that, I know that personally. What you are describing is related.
1thatoneguy@reddit (OP)
You keep shifting the goal posts and going nowhere with your logic. It's interesting you're so driven, but, wrong nonetheless.
morbie5@reddit
Wrong, I'm on point
My logic is sound
You seriously don't think people have been investigated or charged with fraud over something like this? Really?
1thatoneguy@reddit (OP)
Really, really. You have no concept of US law if you think they have even a 1% chance of ever convicting someone regarding student loans in this manner. 99% of fraud cases persecute due to false application information, identify theft, etc. If someone refinanced federal student loans into a private loan with the personal intention of defaulting later, but did not lie or falsify anything, it generally would not fall under a crime. Legally it would most likely still be treated as: civil debt default / breach of contract even if they could prove it. You have zero clue what you're talking about.
morbie5@reddit
You really need to learn the difference between 'convicted', 'charged but not convicted' and 'investigated but not charged'
You gonna source that claim?
Taking out a loan with the intent to default is absolutely a crime
That is you actually
jonsonmac@reddit
Well, since you already know the legal ramifications with 100% certainty, I don't know why you made this post instead of applying for your new loan. Good luck.
Angry-Kangaroo-4035@reddit
80k loan- any private lender will take you to court for them. Unless you're going to claim BK, this is not a good idea. If it was 10k or less, you might have a better chance of getting a private lender, defaulting and say screw it. 80k? The bank or whomever is bringing you to court.
morbie5@reddit
Not always, some lenders are stupid
1thatoneguy@reddit (OP)
The amount is closer to 40-50K anyways, was just trying to remain anonymous and conservative. I know people that have gotten away with over this amount in literal credit cards in states that DO garnish, without ever hearing a peep or suffering any consequences other than a credit hit. Let alone my state that cannot touch private consumer debt.
morbie5@reddit
As do I but that doesn't prove anything
1thatoneguy@reddit (OP)
The point is it doesnt matter if they take her to court? When they win in NC they can't garnish wages and she is relatively judgement proof beyond that. She has no bank accounts and no assets just a 401K.
magicandfire@reddit
Is she going to be able to get 80k in private loans without a cosigner? It’s going to tank a co-signer’s credit and they’ll go after them if they can’t get anything from your wife.
I nearly defaulted in NC last year and ended up declaring chapter 13 so I can either settle in 5 years or do an adversary proceeding. My cosigner has no assets but I felt too horrible about ruining her credit so I’m doing this to kick the can down the road.
1thatoneguy@reddit (OP)
The amounts probably closer to ~55K, I just threw a number out there to stay relatively anonymous and conservative. She has a perfect credit score (800+), zero debt, and makes around 65k/yr. I do think she'd get approved pretty easily with no cosigner. We aren't worried about trashing her credit because we have mine (~700) and emergency funds to fall back on if needed.
Yeah that makes sense, in your situation I probably would have done the same thing. Sorry to hear about your misfortune. Really stinks we all have to play this game of debt. Thanks for taking the time to comment and share!