Strategic default
Posted by EqualExtreme7876@reddit | studentloandefaulters | View on Reddit | 20 comments
i have private student loans through sallie mae that are god awful, the balance is 114,000k right now with 4 loans x2 13% variable x2 16% fixed. I went back to school for the in school deferment because i cannot make the monthly payment. My question is if im planning to strategically default would it be smarter to just get out of deferment and default. george the balance balloons or stick out the 3 more years i have left and try to gain some money. I also live in south carolina. Any help would be great, thank you!
hello__brooklyn@reddit
Apply for borrowers defense and’s at least get an automatic deferment whilst they review your application. Could take months. Could take years.
CountTurbulent4441@reddit
What is this borrower’s defense? Not sure I’ve ever heard of it.
davebone6195@reddit
They are private loans. I believe borrows defense only applies to federal.
What you need to do is look into bankruptcy. Find a lawyer that can help. If these are true Sallie Mae private loans such as Tuition Answer loans, those have been determined, in bankruptcy, to be dischargeable.
I am not a lawyer and cannot answer any legal questions.
EqualExtreme7876@reddit (OP)
what are those type of loans? or can all sallie mae loans be dischargeable?
Gingerandthesea@reddit
There are a variety of student loan types and unfortunately the same companies that service or hold the true private loans also cross into the federal loan program too. This causes even more confusion.
True private loans won’t show up in your federal student loan account. Federal loans do, and some people are told they have “private loans” but in fact have commercial held loans under the FFEL program. These loans are owned by a third party entity, serviced by one of the govt approved servicers and are federally backed by the govt.
morbie5@reddit
Some FFEL are actually held by the government fyi
Gingerandthesea@reddit
Yes there is. It’s a small percentage and many were bought from the commercial entities in the 2008 market crash and converted them into dept held ffel. Those loans will show up on a FSA account as well with the owner of the loan being that of the dept of end and not the guaranty agency.
Unfortunately the loan servicers and the Dept of Ed reps are so bad at giving out accurate information that they regularly interchange the phrase “private loans” with the ffel program and actual true private loans, cause confusion about what is what.
EqualExtreme7876@reddit (OP)
After looking at my FSA account my sallie mae loans do not appear there
Gingerandthesea@reddit
Good to confirm they are true private loans! If you are looking to strategically default, get to know you consumer protection rights relating to consumer debt. Your states attorney general’s office will have that information for you, as knowing your rights can help protect yourself from debt collectors. Since these are true private loans, they fall under debt collection regulations and debt collectors have to abide by them and the statute of limitations. If you know your rights, you can advocate for your self against the harassment by the servicer. They will harass you and your family. I’m not a lawyer or giving any legal advice but working in the borrower defense to repayment realm where folks have had to do the same thing because they had private loans from a scammy for-profit college, strategic default is a thing. Knowledge is power so learn as much as you can.
EqualExtreme7876@reddit (OP)
thank you! i live in south carolina and ive heard there are some more protections here than in other states!
morbie5@reddit
South Carolina doesn't allow wage garnishments for most private debts.
They may still allow bank levies tho
EqualExtreme7876@reddit (OP)
i believe mine are strictly private through sallie mae
Gingerandthesea@reddit
Borrower defense only apply to federal student loans (direct, doe held FFEL, parent plus) and not to true private loans.
However there is a misconduct application that Navient has for true private loans and other companies are starting to allow folks to appt if their private loans are tied to a scammy school.
atarchived@reddit
I’m not a lawyer, but it looks like statute of limitations in your state is only 3 years, which is great news. This is pretty short compared to other states.
First and foremost, so you have a co-signer on any of the loans? This will inform your next move.
Have you read the overall process of strategic default? If not, I would start there. It is pinned to this sub.
There are SO many stories and resources in this sub. Keep us updated and like other commenters said, please find a consumer debt attorney before you decide to default. They can help you understand what to expect in your state as fair as debt collection and shit goes.
EqualExtreme7876@reddit (OP)
yes i have a co signer and yeah ive heard about that for south carolina, i also own no assets and dont make enough to have even close to a high bank account, my co signer is my mom and has a house with a mortgage still on it, my dad is also on the house but not my loans and neither of them make enough to have a high bank account either nor do they have any other assets
atarchived@reddit
Hmm thats good to know.
One thing to be aware of is once/if you default they will go after not only you but also your mom. Both of your credit scores will take a hit, and they will harass both of you for the debt. You’ll need to be on the same page if you plan to strategically default.
Another plan is asking what it takes to remove a co-signer. Sometimes you need to make on-time payments for a certain period of time before you can, but worth looking into to know what that option is.
morbie5@reddit
How much in school deferment will they give you? Do you have a cosigner?
EqualExtreme7876@reddit (OP)
3 more years and yes i do
morbie5@reddit
You know they can go after the cosigner right?
Equivalent-Watch9744@reddit
You need to find a lawyer that specializes in private student loans. I would use up all the deferments you have and save up money.