Can’t pay, won’t pay!
Biden Jubilee 100 striker here. My private loan Covid-19 forbearance will be ending soon (which Navient has been granting me monthly). Never missed a payment before but am more than ready to strike! What should I tell them? That I never plan on paying them another cent? Or, “I just can’t afford payments.” Are there advantages or disadvantages to either approach?
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@Thomas_Gokey what do you think? I imagine so many more people are in this situation right now…
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Really good question. What do we say, as a united front, to our various loan holders that we can’t pay/won’t pay? Always more powerful if it is made clear to the powers that be that this is a movement/protest vs an individual experience. In this time of mistruths, clarity is key.
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I private student loan makes it tricky. We normally do not recommend intentionally defaulting and instead getting to $0 a month in a safe way, but private student loans have fewer ways to do that.
If you do decide to default, you should fully understand what the potential consequences are.
Do you have a cosigner? Because defaulted on a cosigned loan will create collections, and credit issues for your cosigner the first step if you are considering this route would be to go through the process of releasing the cosigner. The process is different with each creditor. You might have to read the fine print on your loan application or master promissory note.
Defaulting can hurt your credit, which can impact your ability to get a job, get other loans, rent an apt, etc. You might get harassed by debt collectors (although there are steps you can take to specifically request they stop calling you, and if they violate that that could be a violation of the Fair Debt Collection Practices Act). The can also seek a judgement on your debt by suing you. If they win a judgement they can garnish your wages.
I am not a lawyer and I cannot give you legal advice, but I recommend you do speak to a lawyer who can so that you better understand your options and what to expect.
One of the rare advantages to private student loans is that you can negotiate a settlement, sometimes for significantly less than the current balance. One of the paradoxes of trying to navigate a debt like this is that you have less leverage to negotiate a settlement if your loan is current and in good standing than if you are in default. Indeed the longer you stay in default, the more leverage you have to negotiate a favorable settlement. But there are risks and downsides to taking this approach so you should be aware of what you are getting into.
Sorry I can’t help more. But seriously, talk to a lawyer and make sure you understand and accept the risks and your options.
I’m currently in the process of deliberately defaulting on several Navient-serviced private loans I cosigned for my son when he was a student at the now-defunct Art Institute of Portland (OR). He defaulted long before I did. We’ve filed two disputes with the DOE through the Debt Collective (still waiting to hear on that). AI was a private for-profit institution that misused its student loan funds and is being sued by former students. (Students enrolled in the 2 years leading up to its shutting down in Portland were forgiven their loans; but this forgiveness should extend to all former AI students.) When making my decision to default I spoke with Thomas Gokey, and with another Debt Collective member who had gone through a private loan default. I also spoke with an Oregon attorney who deals with student loan issues. He confirmed that defaulting was probably the best way to get an ultimate reduction on the loan. I’m a Senior on a fixed income, so there are no wages to garnish; everyone’s situation will be unique. However, I’m hoping for a ruling against AI, similar to those that have been made against other predatory for-profit institutions, with a resulting forgiveness of student debt (don’t know if this would affect private loans). Navient just sent us a letter offering to settle one of the outstanding loans ($39,000) for $5000. I don’t have $5000 so I didn’t take them up on it, but it goes to show that the money they’re telling you you owe them is a fiction. Bottom line: do consult with a lawyer for your state to make an informed decision.
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Thanks for sharing your story @nchordas!
I’m hoping for a ruling against AI, similar to those that have been made against other predatory for-profit institutions, with a resulting forgiveness of student debt (don’t know if this would affect private loans).
Just to clarify, the government’s “borrower defense” protections only apply to federal student loans.
In theory private student loans for schools like AI should also be challengeable in court under something called the “holder rule,” but as of right now we have not found a lawyer who was willing to pursue a “holder rule” case, but that might change in the future.
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Couldn’t agree more. My current best thinking is to say only “debtcollective.org” to them and nothing more. Still open to other ideas however.
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Can’t private loans be discharged in bankruptcy?
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Can’t private loans be discharged in bankruptcy?
Sometimes. But in general it is still pretty difficult to get private student loans included in bankruptcy compared to other types of debt. Hopefully that could change soon.
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It DID change. Shouldn’t this be a HUGE story on this site?
@Dinandrea, there have been a number of court cases like this where individuals have been able to get student debts discharged in bankruptcy. It does seem that slowly but surely the courts are more willing to allow this.
In terms of this most recent case, I have read that article several times and it is not clear to me at all what the larger implications are for everyone else. I am not a lawyer or an expert in bankruptcy, and in general Zack Friedman, the writer of that Forbes article, often gets the story wrong. As far as I can tell this is one more sign that things are eroding on the bankruptcy front but not anything more.
If you wanted to explore whether bankruptcy is the right option for you, or if your student loans might be dischargeable, talking to a local bankruptcy lawyer is a great idea.
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This is related. If this legislation passed I think it would shift the ground for everyone re: bankruptcy.
In general I think this is a good thing and I’m glad Durbin is doing it. We can push for both bankruptcy reform and full cancellation and College For All.
Ideally no one should have to file for bankruptcy to deal with their student debt because student debt shouldn’t exist. But we live in a world far from ideal, and this would help so many people, so I think it is important to support it in anyway we can.
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Is anyone here as afraid of defaulting as I am?
Do we have pro-bono lawyers/therapists among us who can support those running ragged?
My stress right now is that I am overseas (for the ostensible 2 years) but NOT earning a regular income (just making ends meet thanks to art/academic gig economy, made worse post-covid). There’s a part of me that wants to come back and take a more active role in Debt Collective; there’s another part that feels safer not being there (but I suspect the long arm of debt collection can easily find me in the UK if I default)…overall I am shaking from anxiety and exhaustion.
Loan summary: Private SallieM/Navient loan taken in 2013 (46K); managed to make 29K in repayments but still 40K left (spread out across 15years since 2013).
I understand I have 5 choices and in the order of most scary to least:
1)
not pay / default (may need the right language for this and grow some courage first)
2)
Extend the life of loan 10 years to get into rate reduction plan (that only lasts for 27 months; and no more than 2x in 5 years) - this is expensive in the long term but makes monthly payments fairly doable - they won’t send Ts&Cs over until I agree on phone; and they seem to say there is no penalties for early payment but this one is hard for me to commit to given I can’t summon hope for a better 2021/thereafter income (living so long in precarity messes with your mind)
3)
Order the “Covid Special” of 12 months interest only payments (they don’t know how long more it is “on offer”) which one can get out of if the need goes away; extends the life of loan for 12 monthsl after which it gets reamortized (sp?) and then back to Square Suck. Same arrangement in that Ts&Cs only get mailed after agreement; and they tell me there aren’t any penalties.
4)
Order the “regular” (always on offer) of 6 months interest only payments (same terms as above it seems, except 6 months)
5)
use the remaining 9 months of forebearance i have left on the life of the loan (ie: the next 6 years of an original 15 year loan).
Finding a lawyers who can advice on strategy has been hard because I’m not from a particular state; i’ve been cobbling together 10/15min free consultations and I wonder now which state to would be best to move to (if I choose to return) for the most support for student loans in terms of resources and maybe sympathetic courts? What happens when I default - can they nail me here? (I fear my mental health may not be able to take this well given past stressors in last 3 years).
I’m also wondering:
Does anyone have any tips on how to keep records / recordings to build evidence (like has anyone ever recorded conversations with the loan modification customer advisors?)
What other bits of actions/practices should we also have to make us feel less scared or paranoid or even FOMO on loan forgiveness because you’ve signed up for a rate reduction program?
When would a bankruptcy filing make the most sense?
How does one sum up courage (and funds) to get in a lawsuit/adversary proceeding post bankruptcy?
HELP 
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Yep, defaulting is a scary thing. And we can rely on each other for help. To me it’s less scary than riding the capitalist train to our total extinction. I deal with the anxiety by knowing that we are on the correct moral side of this thing. And I don’t want to leave this planet without being a pain in the ass for the bankers.
I’ve lived abroad also, and it definitely complicates things. Talking to a lawyer in my state (TN) really helped me to feel better about my decision. The damage from a lawsuit can be mitigated; I don’t expect it to be fun, but lenders do not have the power to ruin me. I’ve decided to never give them another penny.
I’m afraid I don’t have answers to all of your questions. But I am happy to talk. Send me a PM if you want to connect.
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