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Retired Life with Defaulted Loans
May 4, 2019
1:26 pm
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May 4, 2019
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I’m a 50yo making $50K per year. I got into school loan debt while getting an education-based master’s degree. After YEARS of calls, letters, deferments, the whole “pay on time for 9 months and we re-evaluate”, as well as companies closing and loans moving around, have Mohela, ACS, Nelnet, Pheaa mail that litters my office. I have 2 loans and they are both in defualt because after faxes, calls, emails, begging and pleading, I could not afford the final IBR suggested of either loan – one wanted $800/mo, the other $600/mo. You would think I worked at NASA and not an elementary school. Neither was willing to accept what I could afford to pay – $150/mo to each, though they took the money I sent, applied it to the interest and then told me I hadn’t paid – was behind in my payments. The $25,000 loan ppl garnished my wages – they now pull $500 per month from my salary. For the first time, my tax refund was seized this year – the $80,000 loan ppl took it, which I have no problem with because it’s probably more than they would have gotten from me at any rate, and they have to wait until the $25K ppl finish their default before they can place their own. My credit was already an issue due to very bad decisions at a very young age, so it’s not a concern. I have downsized my living expenses, and I actually live comfortably, believe it or not. I just don’t live above my means. I don’t mean to sound flippant, but at my age, I’m just glad the calls stopped, honestly. They were relentless. I’ve come to accept that I’ll probably be paying these people until I die (yet another reason to NOT stop smoking), so outside of leaving the country and never coming back, I’ll just live with it. I’m single with no children and didn’t have a co-signer, so my debt issues are truly my own.
My questions:
1. My mother is planning on leaving me her home when she passes. Can either loan place a lien against her willing me the property or me selling that property?
2. I understand that my social security can be garnished as well – I assume loan number 2 is waiting for that option. I have retirement plans with 2 companies as well as a 401K. Can they garnish those as well?
3. If I retire on mental disability (which isn’t far fetched for me at this point), what happens to my defaulted student loans?

May 4, 2019
2:05 pm
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May 3, 2014
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Are all of these loans federal? If so, you should be able to get them under control so that the garnishments stop and your tax returns, home and retirement funds are not put in jeopardy.

If they are all federal, you might want to look into federal direct consolidation. It is a little more tricky because the loans are currently in default, but the way the process works is that your old loans are paid off in full and a new consolidated loan is created. This would give you one loan with one lender, which should make things less complicated. More on the process and how it works can be found here: https://studentaid.ed.gov/sa/repay-loans/consolidation

I’d also suggest looking into the revised pay as you earn repayment plan. This one will likely have the lowest monthly payments.

It sounds like you have had many years of struggles, but with the federal loans it is possible to get them back under control. In fact, many people end up paying more for garnishments than they would have had they been on an income driven plan.

If you feel like your loan servicers have made errors in their handling of your loan situation, you might also consider filing a complaint with the consumer financial protection bureau. This will trigger a review of your account: https://studentloansherpa.com/file-compliant-student-loan-company/

If your loans are private, things get much more complicated. I know money is tight, but meeting with a local attorney who specializes in student debt or collections might be an excellent investment.

Best wishes,

Michael

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