Default Only Option
Posted by AngryPAC@reddit | studentloandefaulters | View on Reddit | 5 comments
190k in private loans. Federal loans 400k between spouse and I. Doesn’t matter why or how but here we are.
Make a combined ~200k per year. Bring home ~11k net monthly. 1200 mortgage. 1000 car payment. 1500 daycare. Another 1-1.5k misc costs. So 5-6k/month in outgoing costs if not more with current cost of living. So 11k-6k makes 5k left over. Total payment for loans is 2k. On PSLF. Ten years to go.
Do I suck it up and pay or do I say to hell with it and default, sock the money away, and hope for a lump sum settlement?
Also, yeah we do okay for ourselves and 2-3k left over isn’t bad. But it sure doesn’t go far nowadays.
No_Excuse159@reddit
You’re actually in a better position than a lot of people I’ve seen with similar debt loads. If you truly have about $5k left after core expenses and $2k is going to loans, that still leave. 3k monthly flexibility. You have the ability to pay.
For PSLF are you on IDR plan?. No reason to overpay those if forgiveness is the goal. On the private loans, that’s where things get riskier.
Defaulting sounds appealing online, but in the real world it’s not some clean strategy. You can still he sued, wages garnished, bank accounts levied, and destroy your credit. Settlements might happen but it does require a fairly large lump sum. Not sure I’d roll the dice on this.
The uncomfortable truth is often that people can dig out of six-figure debt faster than they think but it usually requires doing things they don’t want to do. I’ve seen people knock out massive debt by getting second jobs, even with stressful full time careers and kids.
In your case, even without going extreme, $3k/month extra is $36k/year. That’s a serious dent, especially on the private loans where interest is probably higher.
So yeah you don’t “have” to suffer, but you also don’t need to blow things up by defaulting either. You’ve got a path here that’s actually pretty workable if you stay disciplined.
AngryPAC@reddit (OP)
I agree with your take. And I fully admit it’s mostly the disappointment I feel in our current society that they allowed this to become a problem for so many. I work hard. Have a good job. Solid education. And still “struggle” compared to the salary I make.
Desperate-Media-3692@reddit
Defaulting on student loans can really hurt your credit and even lead to wage garnishment. It's normal to worry about that and look for ways to avoid it.
morbie5@reddit
I would be very surprised if the private lender doesn't sue considering the balance and your household income. That probably means wage garnishments and maybe a bank levy.
What are the interest rates on these private loans?
Why is your take home pay only 11k considering you are married and have a child? I'm assuming you are saving for retirement with pretax withdraws?
magicandfire@reddit
You can’t settle or run out the clock on federal loans so I would continue with PSLF and IDR for those so you’re paying the least possible monthly.
For the private ones, It’s entirely possible that they just sue you before offering to settle. If it was a smaller loan, maybe you could just run out the clock or settle, but when the loans are for $190k and you have the means, they’re going to try to make you pay because they are predatory and want their money. It’s also possible that they settle for 50% and go away. Hard to know, but I was told by my lawyer that the lender for my private loans was very likely to sue me over a similar amount and I earn a fraction of what you do.
Some factors to consider IMO are how bombing your credit would impact your life- my score dropped into the 400s when I was defaulting on my private loans. Will you need to make any big purchases in the next 7ish years that a default would be on your credit? Does your state allow wage garnishment for private debt? How long is the statute of limitations in the state that the private loans were taken out in? Do you have a cosigner attached to the loan?
For how much you earn, I think I would try to refinance for the lowest rate possible and aggressively pay them off. Having to go to court only to have to repay on top of your credit being ruined for nothing would really suck.