This is my first post on this board. I spent half the night last night and most of the day today reading this site. What a gold mine of information!

I'll describe my situation briefly. I have about $14,000 of student loans that are in default. I haven't dealt with them since 2001-2002, and last night after pulling my credit report and reading this forum, I decided that I really need to face these student loans. From what I've already read, it's only going to get worse from here.

My current situation is that I've been unemployed since August 2004. I've been doing odd jobs to make ends meet, but I have a promising opportunity that just came up last week (we'll see). My biggest concern is that once I start this process of bringing my loans out of default (whether it's rehab or consolidation), that I won't be able to keep up with payments -- my understanding is that you only get one shot to pull loans out of default, so I want to make sure I can fulfill this obligation. It's also my understanding that once loans are in default, you can't defer them.

So, I guess I'm at an impasse. Any words of wisdom? I'd like to get the ball rolling, but honestly, I'm scared. The language on the FSA website doesn't help much:

"All guaranty agencies and the U.S. Department of Education (ED) will accept regular monthly payments that are both reasonable to the agency and affordable to you."

The "reasonable to the agency" part is what worries me. At the moment, all I can really afford is maybe $50 a month until I find more permanent employment. What if that's not "reasonable to the agency"?

Any advice would be greatly appreciated.



pixelsnob

Theoretically, I've heard a lot of people here say that their monthly payment had to be at least 1% of the total loan balance (including late fees/penalties and all that). Assuming that $14,000 is the total owed, including all of that other stuff, then you would be looking at about $140/month -- probably not realistic in your current situation!! Before you call, you might want to make up some sort of financial information page where you list your income and subtract out ALL of your expenses (don't lie, but don't underestimate, either), showing the maximum you can REASONABLY afford. At least you could have that in front of you all ready to go when you contact them. "Reasonable" when you're unemployed is certainly different than "reasonable" for everyone else, so I'm sure you'll be able to work something out.

Has anyone contacted you recently or are you starting this on your own? If it's the latter, that's better -- they're much more willing to work with you if you contact them, rather than the other way around.

If rehab doesn't turn out to be an option for you, then you can always look at consolidating the loans. If you consolidate in default, you must go into the income contingent plan, which should be okay for you, anyway. It doesn't take the default notation off of your reports, but, if it's that or remaining in default, that might be an okay alternative for you -- if you defaulted in 2001, it should fall off in 2008. If you go to the DOE's consolidation web page here, and then click on "online calculator" on the left side, you can put in the total amount of your loans and your current interest rate and your income and it will give you what your payment under that plan would be. It's pretty accurate -- I think it was only off by about $2 or $3 per month on mine.

I hope this helps!! Good luck!!

First of all, thanks Ziggy!

Let's see. Well, from what I've read already, I'd really like to rehab them, since that seems to be the shortest distance to better credit. But yeah; I'm not sure if I'll be able to afford it right now. If it is indeed in the neighborhood of $140, I might be able to swing that, but it's going to be iffy.

As for who's initiating this, technically, it's me. Then again, I haven't exactly been the easiest to find the last couple of years. I'm sure they've been trying to get a hold of me, they just haven't been able to! Actually, for some reason, they have my mom's address, and she's gotten a couple of calls in the past. But they haven't talked to me in years.

Anyway, this gives me a little better idea of what to do. Thanks again for the suggestions!


pixelsnob