How bad will it hurt my credit if I let my student loan go into collection?
I recently graduated and I have a private student loan through Sallie Mae and the company refuses to give me a payment amount that I can afford. All my government loans are in good standing because they allowed me to file an economic hardship deferment, but the private loan won’t do anything other than giving me a payment of $400 per month. I only take home about $1000 per month and I live on my own. So that payment amount is just not possible.
The other option is forbearance, which I did once and cost me $150 (none of which goes toward paying my loan, it just keeps them from putting negative info on my credit.) From what I understand the most you can have a forbearance is 12 months after that the only option is to pay or go to collection. I’m SO low on cash that I’m about ready to just let it go to collection. How bad will this hurt my credit. The sad thing is that I’d be willing to pay a lower monthly payment but they refuse and say $400 or nothing. This is the unfortunate after math of me going to an expensive private art school when I first started college (which I eventually transferred from but still racked up a mess of debt.) A school that didn’t offer the government loans and grants that I got once I transferred – hence the private loan.
Any idea on how many points it may take away from my score. Before I graduated it was like 750, which was considered excellent. Pretty sure it won’t be there anymore…..
Miki…Yes, I wish I’d known this when I was in school getting the loans. I was always under the impression that I could defer all my loans after graduating or at least get the loan payments based on my income.
I even requested in writing to switch to the extended 25 year payment plan and they sent a letter back rejecting me saying that if I did that the payments would be higher than their “select step” plan, which is the plan that’s $400 per month – which I don’t understand how a 25 year payment could be more per month than the $400 plan which I believe is 15 years. They also say they don’t offer income contingent plans for the private loans. Only full payment or “select step”-whatever that means.
The sad thing is that I got these loans right through the school and they included it in my financial aid package as if it was a regular loan. So I had no idea when I was signing up for it that it had stricter repayment options. I thought it was just a supplement to the other government loans.
December 27th, 2009 at 11:23 pm
I would say, try and not let this happen. They can take away your car, furniture, etc. It’s horrible. It goes to a Collection Agency! And it will greatly hurt your credit score, as far as I know.
Talk to your school, talk to the company again. Go as far to the top as you can and wriggle your way in there and have all the evidence to back it up. Maybe get a lawyer involved? Perhaps Pro Bono?
Try getting a second job? Ask for a raise? Let your boss know about what’s happening? Drive less? Use a Fuel Advantange card (see Dunkin Donuts, Price Chopper, or your local grocery stores for more information) when buying gas? Travel by foot, bike, or bus system? Talk to your parents/friends/family for help? Pay as much of the loan you can pay per month? Buy less takeout/fast food? Cut back your budget drastically? Get subsidized housing? Get a cheaper apartment?
December 28th, 2009 at 2:51 pm
First of all let me start by saying that I strongly urge you not to let your loan go into default!!! This is terrible for your credit. Not only will your credit score drop but you will also have other issues as well. This will hurt you in the long run because when you go to buy a house, car,etc. they will see where you did not pay your loan off and you will have trouble getting credit anywhere else.
Do you have relatives, family or friends who could help you out until you can find a better paying job?
See the reason private loan companies will not work with you is because they are not backed by the government. So when you don’t pay they automatically lose money.
I would suggest continuing forbearance until you can work something out.
December 29th, 2009 at 11:04 pm
This is the equivalent of going into default on a federal loan. Avoid it if you can at all costs, since the negative information stays on your records for 7 years after the loan is paid in full, making you a poor credit risk for a very long time. This is one of the dangers of alternative student loans, their repayment provisions are strict and not easily altered once you’ve signed the note. I would strongly suggest that you go above the level of person you’ve been dealing with at Sallie Mae, possibly to their Default Prevention office to see if you really can’t work out something on the order of graduated or income contingent repayments, and then taking some of the other suggestions offered to save on expenses.
January 1st, 2010 at 12:13 pm
If yo can by all means avoid hurting your credit , it would be your best bet. Now a days it can hurt u more than u know. Now they cancheck your credit and do when you purchase car insurance.Regardless if you would ever late or not , they will charge you higher rates for less than perfect credit score. They are not the only ones Banks do it too