Dear Mustachians,
A question for your collective expertise: I've just finished my PhD and a lot of years in school. The PhD was funded, but leading up to that, in youthful and total financial ignorance, I accrued a truly massive amount of student debt on the order of 150K if you can believe it. Quite a toxic soup with five different lenders in both the US and Canada, some private and some government.
I have willy nilly let some of this go into default. Needless to say, my credit is destroyed for the moment (and undoubtedly for some time to come) and I can't refinance with SoFi or DR.
The good news is 1. I don't live in the US and don't plan to and 2. I have some funds coming in through an inheritance. I'm hellbent on turning around my financial ship and obviously want to move having thought things through.
Questions:
1. How about Default? Does interest accrue while in default? I think it doesn't, which makes it a zero percent loan (price is you can't have any more credit). Is there a benefit to leaving loans in default while vanguarding my capital + my aggressive savings and then aiming to get a settlement for 50% of payoff amount in a few more years?
1.5 Should I seek settlements now on what's in default? Should I let loans go into default to ask for settlements?
2. Settlement implications: I know that one pays tax on whatever "income" you get from the portion of the loan that is forgiven in a debt settlement. How can I do a back of the envelope calculation to see if a settlement is still worth it?
3. How to do back of the envelope calculation for the value to me of tax deduction from making student loan payments?
4. Given that I will have some collateral, what about secured loans as a consolidation loan for my whole mess of lenders and currencies? Has anyone had luck with getting a large loan at a decent rate in spite of bad credit with other sorts of evidence: employment and collateral be it a home or investments (and any difference between using one or other of these)? Does a secured loan explicitly and legally link your debt to the collateral, giving lender right to take your stuff should you mess up? I certainly don't intend to do that, on the contrary I want to get the loans over and out ASAP, but preserve the only leg up I've had so far in my bizarre financial life to this point.
Thanks much in advance for your thoughts!
