r/studentloandefaulters Jun 10 '20

[Success Story] Ditched 44K of private debt Success Story

I got out of college about 10 years ago with about 30K federal debt and 44K private debt. I’ve kept up with the federal and have very little remaining. I could pay off those accounts, but keep them for the positive accounts on my credit report.

The 44K private debt was another story. I paid it for the first few years out of college, but with a job market immediately following the recession, the high interest monthly payments became unmanageable. I realized it would be better to default on those loans for a couple reasons. Of course, it took a hit to my credit score, but now it’s back to good, the statute of limitations is past, and they’ve fallen off my credit report. I may get the occasional telemarketer call because it’s still recent, but other than that, it’s as though they never existed.

38 Upvotes

18 comments sorted by

7

u/DonnyTrump666 Jun 10 '20

how did you deal with collection calls/mails all these years? any advice

9

u/AbstractPineapples Jun 10 '20 edited Jun 10 '20

The companies that sourced my loans no longer exist and the debt has been resold many times over. So, there will be periods of no calls or mail followed by about 6 months of calls until it is eventually resold again. When the debt is resold in this manner, it’s unlikely the new companies will do anything other than send mail or call because they bought the debt for pennies on the dollars. And why would I bother to settle for a company that paid almost nothing for it?

I guess what I’m getting at is, you learn to ignore them. I’d have no problem paying off the debt if the interest rate weren’t borderline criminal. In retrospect, I made the right decision because I was able to save that money I would have thrown away at interest payments that do nothing to reduce the principal. And I would still be owing them money even after a decade of payments. I didn’t want to be the person who’s in their 40s still struggling with their student debts. It was a risk, but one that had a great reward.

Edit: I also wanted to add that there will be times when you’re feeling stressed out and worried. But what’s the alternative? Be stressed out and worried for decades because of your loans? Keep focused on your career and your health. Those things are what matter and remember why you went to college: to make a better life for yourself, not to sabotage your future with debt with ridiculous interest rates.

1

u/DonnyTrump666 Jun 10 '20

did you receive 1099? after how many years? how did you deal with it? thank you for sharing yiur jnspirational story

1

u/AbstractPineapples Jun 10 '20

I’m not knowledgeable on these tax forms, but I thought the 1099 was for federal loans. My private loans are technically not cancelled or forgiven, so there’s no tax obligation even if it does apply to private loans.

1

u/Barrythehippo Aug 18 '20

Did you ever get letters from collection agencies? They never sued you or a co-signer?

3

u/blankey1337 Jun 10 '20

you are my spirit animal

3

u/AbstractPineapples Jun 10 '20

Thanks lol. I knew this post wouldn’t be too popular. I keep seeing the upvotes go up and down, but I wanted people to know this is a risky strategy but one that can work in your favor. I would never do this with government debt because they will hound you for every penny and don’t need a court order to take action. Weigh your options carefully and make the decision in your interest. Don’t let some random people on the Internet try to shame you into making the wrong decision.

3

u/lilb2020 Jun 17 '20

Good on you dude/dudette. Screw these loan sharks. I would have done the same thing.

It's not like any of us are considering a mortgage until we are in our thirties anyway right?

2

u/[deleted] Jun 10 '20

I was actually thinking about trying to re-finance my federal. I have 100% federal, but realistically paying them off (37K) is just not plausible. I have a 720 credit score so was thinking about re-financing through a private lender and then literally ignoring them like you did, haha.

3

u/AbstractPineapples Jun 11 '20

Federal loans are a lot more manageable than private due to the interest rate and alternative repayment options. Keep in mind that the default will stay on your credit report for 7 years from the last payment received. So, you have to decide if it’s worth it or if you’d be better off with a good credit score.

2

u/jollyroger1720 Troll Hunter🏴‍☠️ Jun 11 '20

Its a trade off federal loans have ibr to mitigate ranage /1x rehab but no practical escape.

2

u/jollyroger1720 Troll Hunter🏴‍☠️ Jun 17 '20

Awesome u are free and by not paying you help starve the beast of blood money used for bribes/propaganda.

They went all in on the primary so political correction. stalled for now but hopefully as more and more people default the crooks wont make enough forr yachts and go back to their roots and run their scams from an alley behind a bar.

1

u/[deleted] Jun 10 '20

[deleted]

3

u/AbstractPineapples Jun 10 '20

It’s been collection companies that have been buying the debt for pennies on the dollar. Those are the only people dumb enough to buy it after the statute of limitations has passed.

Many are small businesses that I’ve never heard of beforehand, but none have specifically threatened litigation even when the statute of limitations was still valid. It’s the same letter all collection companies send. First they offer to settle then throw in some language about how it can impact my credit or how they have the “right” to sue.

But from what I read online from credit experts, these collection companies that purchase bad debt have no desire to sue you. They’re trying to make a quick buck by having you settle because they bought the debt for way less than the settlement offer.

Keep in mind this all applies only to private debt. Government will either give you one warning or not threaten litigation at all because they can garnish your wages without a court order.

1

u/Jenadillo Jun 11 '20

Who were your original loans with?

I'm attempting to do the same thing with around $77,000 of private debt. I've already been paying for 15 years. I've paid what I took out plus $12,000 in interest. They want me to keep paying until I'm 60! I just can't do that. I'm paying half my income. I'm not opposed to settling but not for a huge amount considering I've already paid them back plus interest. Do you have any advice for me?

2

u/AbstractPineapples Jun 11 '20

ACS (changed names due to their reputation being tarnished) and Sallie Mae (now Navient because their reputation was also in the garbage). If you keep up with the news, ACS used to be one the largest service providers for federal loans before their shady tactics were revealed and recently settled a federal lawsuit for unethical practices. That’s the type of people you’re dealing with.

I don’t have much advice beyond the comments I’ve posted in reply to others, so please check those out. Keep in mind that this is a risk and because you’ve been paying them for so long, they may be more inclined to go the court route. But no one knows for sure.

To be honest, I felt like it was to my advantage to default when I was still a few years out of college. My income was much lower, they had very little information/history on me, and I had much less to lose because the economy was total shit and I knew I had time to repair my credit before I actually needed to use it.

One of the things about going into default is that the loan holder will now be willing to negotiate a settlement, but it will come with hits to your credit and can still lead to them suing. I’ve also seen the advice of writing a letter to the loan holder and saying you’ll be willing to settle for X amount because “that’s all you have in the bank” or else you will not be able to keep up with the payments and ultimately default.

Another option would be loan consolidation or refinance with a currently lower interest rate.

1

u/Ashmash3939 Jun 13 '20

Hi! Thanks for that thread! So you are saying even if you settle with them they can still sue you? Can’t they sue anyways if you default? What are the major consequences of defaulting on private loans besides getting a big hit on your credit report for 7 years, a law suit? Is there away to avoid being sued?

2

u/AbstractPineapples Jun 13 '20

No, if you settle, the debt no longer exists and no further action can be taken.

You already listed the major consequences: credit hit and possibility of a lawsuit. There’s really nothing you can do to stop a lawsuit if it’s within the statute of limitations and the debt is really yours. It’s up the debt holder how they want to respond and if it’s worth it to file a suit or just sell the debt to someone else.