Hi all, Nick from Black Mountain NC. I’m in for over $120,000 on a private student loan through Naviant (serviced by Mohela) its was 80k when my parents cosigned on it in 2004, and Ive mostly always made SOME payment on it… pretty wild how you can pay a debt to the best of you ability and the amount goes up? anyway, I’m thinking about refinancing with Yrefy just to lower the monthly payments, and because they are the only company that will “help” me - credit is very very bad (because of this loan) - I’ve been working with a local nonprofit called Ontrack to help me get a grasp on this situation, and they think its a good idea to go with Yrefy, but it doesn’t sit right with me. Yrefy is predatory company that buys defaulted loans for pennies on the dollar and sells them back to people at the ORIGINAL principle with a lower interest rate. you also sign away your rights to arbitration or any future class action law suite against them. it sucks. but I have kids that need to eat, and I dont have a ton of money. any advice out there?
My answer here is sort of in random order.
You need to also look into how this affects your parents since they cosigned the loan. If doing something gets them out from under them being a cosigner (and I’d get what happens to them in writing PRIOR to doing anything) that give you more options. If they will remain a cosigner then your options are more limited.
Private loans are easier to get rid of in bankruptcy (although there have been changes with government loans recently that is making that easier too) but doing so would affect them too. If it hadn’t been cosigned I would have suggested bankruptcy as a viable option (unless you own things not excluded from that kind of action that you can’t afford to lose). Since they cosigned bankruptcy on your part would affect them too.
Since your parents cosigned they are on the hook too. I’d not take any action about this without their approval too because of that. You are caught between a rock and a hard place in this situation.
Refinancing only in your name would get your parents off the hook (but may not be possible if since your credit is bad but it is worth trying) and then declaring bankruptcy would get you out from under the loan. Declaring bankruptcy while they are still cosigners won’t help the situation as they are then still responsible.
See if there is a rehabilitation program available to get your loan back on track and back in good standing, see if there is an alternative repayment plan you can use that you can afford, if the loan offers forbearance that might temporarily help while you figure out what you are doing although the interest would still accrue.
If you don’t like the choice that company gave you, get a second opinion from another company that does the same thing about solutions.
Reading about Yrefy they appear to be a legit company although they had to pay fines in MA for their business practices so your concerns may be warranted. Their company company focuses primarily on helping students with delinquent private student loans. It would appear in the end the fees you pay will be higher. It also may be they are the “best of the lot” when it comes to this kind of help. It may be prudent to involve your parents in whatever solution you arrive at since this affects their credit and finances as well.
As far as I can tell they settle your debt for less than the total amount and then charge you the full amount (making their money that way). If you can, on your own, settle your debt for less than the total amount (probably would take an attorney to do that), an amount your parents can afford and then pay back your parents that might be a viable option.
ALSO check with your state about the statue of limitations for collecting on private student loans (it is based on when you made your last payment or in some cases when you last agreed you had the debt - the rules are very state specific), If you are beyond that they can’t sue you or go after you (or your parents) in any way. In NC it looks like it is 3 years. BUT again check how they determine when the count starts. I do not know if your parents live in a different state how that affects it. You might find this website useful Statute of Limitations on Private Student Loans: State Guide
None of your solutions are going to be without cost to your or in some cases your parents as well. It may be you will need to choose the “lessor of evils” so to speak.
PS you might want to read this as well (bankruptcy related mostly) Can Private Student Loans Be Discharged in Bankruptcy?
Also be aware that that site that has these articles is not a non-profit. Likely they make their money when you click through on the loan ads on their site (so be careful and make a free email address that you use only for stuff like this so you don’t get spammed to death with the email you usually use (talking about clicking through on links on credible’s website beyond their articles, not on debt collective or clicking on the links I posted here) . And like anything else confirm the information given here with credible sources.
You might search Nolo.com (attorney’s answer)
Here is one article they give about private student loan bankruptcy and statue of limitations What Is the Statute of Limitation on Private Student Debt? and Private Student Loan Default: Collection Methods & Options and Private Student Loan Default: Collection Methods & Options They make their money from the attorney’s who get you as a client (eg a student loan attorney or debt settlement attorney who deals with student loans - as those are the two kinds of attorney’s who specialize in stuff like this). Their answers are reputable so you might want to spend time on their site reading about specific questions (the earlier urls with Credible are more general which I thought might help you as well).
Thank you for this information. I ended up backing off from Yrefy. They may be a good option for some but it’s helpful to have all the information up front - lots of shadiness going on over there. specifically, scheduling your first payment before you sign the promissory note (which im currently trying to get stopped - no answer on their end, had to contact my bank) they are also pretty hazy on a lot of the specifics around your deal until after you sign. bottom line is its not a sure thing they can even buy your defaulted loan, and if they cant, there are situations where you could potentially still owe them some money… also, when I’ve had questions they always respond by phone - nothing in writing.
Ultimately, I called Mohela and got them to put me on a level payment plan for 5 of the 6 loans with the lowest interest rate, something I’ve been trying to do for months and keep getting the run around about. the 6th loan is at 10.7% and im currently just waiting out the SOL on that one - like you said, 3 years. Ive read that making “good faith” payments in this situation can actually work against you if you go to court. so Im just not touching it for now.
Lastly, I’m sure it’s been mentioned here before, but I petitioned my employer to offer the Educational Assistance Program that IRS article 127 now offers. works out to around $400 a month that they are paying for me, which helps a ton. I have sample IRS compliant paperwork if anyone wants to submit a plan (I believe this also can work if you are self employed, but dont quote me on that)
thanks again for your help.
Be aware that even acknowledging the loan is yours generally resets the statue of limitations in these PRIVATE loans so be very careful about that.
For people who are reading this for the first time - be aware that GOVERNMENT student loans operate differently than PRIVATE ones. There is no statue of limitations on FEDERAL student loans (subsidized or unsubsidized). If you default they will take your federal tax refund (so if that matters to you make sure you only owe a tiny bit of money each your so you have to pay federal taxes - but make sure it is under the limit so you don’t have to pay a penalty). AND if you still owe when you collect social security they can garnish 15% of that without going to court.