The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: ysette9 on October 05, 2017, 07:37:52 PM
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I am asking this on behalf of a friend who just shared their situation with me. I am blessed to have no experience with student loans or any dings on my credit, so I am looking for resources to share with my friend.
The background is this friend is very much the artsy/alternative/barter economy type, the very opposite of engineering me. They took out students loans in the young and foolish years to finance an art degree and then figured out that it didn't lead to any lucrative jobs. Years of low-paying jobs and struggling followed. They finally decided to make a change and retrained in a better field. This person shared with me today that the student loans are in default though and their credit is shot as a result. I have been very slowly feeding nibbles of personal finance advice under the guise of "knowledge is power" and talking up how I've felt empowered by educating myself and taking control of my finances. I think this person is receptive, but I know don't know what advice to give.
What sites/articles/services can you recommend for how someone can get a hold of a student loan situation that I believe has been ignored out of a depressed belief of not seeing a way out? I don't have any details to share so I am really seeking general education and options, the focus on simplicity for someone who does not have a numbers inclination. Thanks in advance.
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What sites/articles/services can you recommend for how someone can get a hold of a student loan situation that I believe has been ignored out of a depressed belief of not seeing a way out?
I would suggest the CFPB's toolkit as a starting point:
https://www.consumerfinance.gov/paying-for-college/repay-student-debt/
And their FAQ on the topic:
https://www.consumerfinance.gov/ask-cfpb/category-student-loans/repaying-student-loan/
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I think the biggest thing your friend needs to understand is that this problem will not go away until they pay the loans, and in fact will only get worse. Student loans are almost impossible to discharge in bankruptcy -- you basically have to show that you have no chance of ever getting a job that will allow you to pay them back, and it sounds like your friend is now in an employable field, so that's not going to happen.* In addition, the loan company is now adding on late fees every month, which are compounding as well. So the longer your friend avoids dealing with the situation, the worse it is going to get. They can even garnish your SS payments if you still owe money! The most important thing your friend can do is just get going.
*By way of example, my brother had debilitating anxiety and depression for a decade. He went to a lawyer to talk about bankruptcy as a way to discharge his @$50K in loans and was told that it wasn't worth filing, because as long as there was a chance he'd improve to the point where he could hold down even a minimum-wage job, the court was not going to discharge the loan debt.
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Thank you for the responses. I agree that burying the head in the sand is the worst policy. I’ll check out those links and pass them on.