Student Loan Consolidation – any hope for me?
Question: Am I the only one in this particular situation? I feel very alone…
In 1996 after graduation, I consolidated my student loans, and one credit card (with school expenses – equipment essential to my education) under a private company (Merlin-Plato). The original amount was around $35,000. To make a long story short, I have paid (conservatively) around $20,000 on the entire loan, but still have $30,000 remaining. I realized much too late that I made a horrible mistake, but it seemed like the right thing to do at the time. I am paying an obscene 6-6.5% above prime, and I shall never be able to pay this loan off at the current rate. I have had only one 6 month forbearance due to financial difficulty, but diligently made payments of $300-375.00/mo every other time, even while dirt poor.
I know now if I had kept the original loans, or used a government consolidation program (I was not aware of this at the time!), I would have half of this amount paid off, and it’s made me quite depressed (part of the reason I am under psychiatric care/meds). I am now contemplating Chapter 13. Yes, I am ashamed of having to to this, and actually looked forward to paying off my student loans, to prove I can indeed do this, and to show that non-trust fund kids have a fighting chance of financing a good school. I wish I had another choice, but everyone I’ve spoken to is stumped. My mom has even tried to take out a second mortgage to pay the loan, and I would have paid her, but the rates were too high (I cried when she told me this). I worked with an organization called MyVesta.org, and they couldn’t negotiate a rate reduction with the company. I’m at the end of the rope.
There was also an incident that pushed me over the edge; a collections person mistakenly called my mom (the cosigner) when my loan was not in collections. He then proceeded to insult and patronize her. I did call back and raise hell, but received no formal apology. I don’t know what else to do. As of now, I’m told my loan is no longer a student loan, but “private.” Obviously, it will be a cold day in Hell before I can refinance this with an unsecured loan (I live in New York City, so of course I don’t own a car or home). I know I can’t be the only one in this situation, but I know of no one who consolidated with this company after graduation, so I have no one with which to compare notes.
I would really rather not have to file Chapter 13, and heartily welcome any advice or similar stories. Another note: I also have a hefty IRS debt, left over from a few years back when I had a choice of either paying the IRS or the loan company. I am working from home at this time, so I do have time and energy for any “creative” solutions.
Answer: Why was the collection person calling your mother? Check out the federal fair debt collections act. Keep track of the name, date, time and content of each collection effort. Write the company and tell them not to contact your mother any more. Debt collection people are prohibited from contacting relatives, employers, etc. to discuss your debt with them.
It may be that the consolidated loan is dischargeable in bankruptcy, but your student loan probably was not, except if a considerable time goes by or in the case of hardship.
Older loans are sometimes sold to companies who specialize in people who have defaulted. These companies often accept a lesser amount in full payment, but be very very careful and do this only through an attorney or they could rip you off again.
Chapter 7 bankruptcy may be a good idea in this stage of your life and the debt, if you do not own anything above the exempted assets. If you do not have a car or a house, you may just be able to discharge these debts without further payment. Again consult a bankruptcy attorney with a list of your assets and debts. Many bankruptcy attorneys give free initial consultations.
Your credit appears to be shot anyway, so a concern regarding what bankruptcy would do to your credit really is not a big consideration.
Keep in mind that trying to pay these debts after you have defaulted does not help your credit ratings. If you keep trying to pay and drag it along for a few more years, that just means that your credit report will show years of bad credit. Bankruptcy brings all the bad credit reports to an end at a specific date and after that you can do things to restore your credit ratings.
Hope this helps.
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