So me and this guy at work both owe more than $30,000 in student loans, and we both dropped out of school. I've been paying mine. I have them consolidated, so I have a lot of interest and I'll be paying them for a long time. But he says he's not gonna pay his until the lenders hand the loan to the government, and then he'll be forced to pay them back. BUT, he says the government won't charge interest, they'll just ruin his credit for awhile.
So basically he's saying that I could just refuse to pay back my loans until the government gets a hold of them, and then I don't have to worry about any interest. The only consequence being my ruined credit, and I don't plan on buying a house or new car anytime in the near future so that doesn't bother me.
Is this guy out of his mind or is this the perfect scheme?
2007-08-02 19:48:45 · 6 answers · asked by Jeremy E 2 in Education & Reference ➔ Financial Aid
The reason it's called "ruining your credit" is because it lasts forever.
If you are in a difficult situation, you can plead with Sallie Mae. They can defer 'principle' payments for a while. You'll just be paying interest, but the debt will not be decreasing.
I cannot believe that the GOVT will not try to recoup all of their loast interest. They certainly do it with taxes! According to their website:
The consequences of default are severe:
¤The entire loan balance (principal and interest) can be immediately due and payable.
¤You’ll lose your deferment options.
¤You won’t be eligible for additional federal student aid.
¤Your account might be turned over to a collection agency. If so, you’ll have to pay additional interest charges, late fees, collection costs, and possibly court costs and attorney fees. These costs will really add up, and it will take you even longer to pay off your student loan.
¤As mentioned earlier, your account will be reported to national credit bureaus, and your credit rating can be damaged. You might find it very difficult to receive other types of credit, such as credit cards, car loans, or mortgages. Because many landlords do credit checks, it might be hard to rent an apartment. Some employers check to see if you’re responsible by looking at your credit rating, so bad credit could even affect getting a job. On top of this, your default will remain on your credit report for up to seven years.
¤Your federal income tax refunds (and in some states, your state income tax refunds) might be withheld and applied toward your loan repayment. This happens a lot to defaulters, and it can really hurt if you were counting on that refund.
¤Your employer, at the request of the loan holder, may withhold (garnish) part of your wages.
¤You might be unable to obtain a professional license in some states.
2007-08-02 20:19:22 · answer #1 · answered by bedbye 6 · 1⤊ 0⤋
No way is this the perfect scheme. There is nothing more damaging personally than ruined credit. I should know because in my career I sometimes come across people with such a huge problem.
Not only will a ruined credit stay with you at least for 7 years, but some of the side effects (besides the ones listed in the previous post) include of course not being able to obtain any future loan of any kind. This means that most banks, financial institutions, mortgage company's, car dealerships, etc. will not loan you period because your credit score will now be in the 500's. Even if your salary should be $75,000+ you still won't be getting a loan from them. You'll have to go to special places that cater to people with bad credit, the one's that state in their commercials "no credit check!". While this'll allow you to get the car, loan, etc that you'll need, it'll come with the highest interest rate possible within that state (23.99%+) and whether or not you pay that new loan off in good standing it won't get reported to any credit bureau. The irony being that the company that's lending you your new loan won't do a credit check on you, but in turn they'll not send your "good standing" status to any of the three credit bureaus since it costs the company money each time they do so on a monthly basis.
So by avoiding paying student loans that were garnering interest of only 7% to 8%, you'll now be getting loans (if at all possible) for the next seven years in the 23.99%+ range AND they will not help you in recouping your credit. Not to mention all the back pay the government will force you pay through you taxes and so on, as listed in the previous post. Hope this helps.
2007-08-03 03:30:38 · answer #2 · answered by williamdefalco 4 · 0⤊ 0⤋
He is an idiot. If you don't own your house and plan to buy one, I doubt mortgage lenders will want to lend you money if you follow this plan. Instead I would use a good student loan calculator to figure out how much to increase my monthly payments so that I could get out from under this loan as soon as I could.
2007-08-10 17:59:13 · answer #3 · answered by Iljimae Fan 7 · 0⤊ 0⤋
sure, you will desire to pay activity on a student mortgage... that's how the lender makes a earnings. there is not any way around paying activity; notwithstanding, in case you pay off your person loan early, then you definately will keep plenty in activity.
2016-10-01 07:36:35 · answer #4 · answered by teresa 4 · 0⤊ 0⤋
Your friend is grossly incorrect. In fact, when his loan defaults and is sent to the givernment, it will be serviced by a collection agency. It is not uncommon for loan balances to double after fees and interest are charged. He will be charged interest at least double what he is now.
Please tell your friend to refer to his Prom note and his borrower rights and responsibilties which clearly 9and in laymans terms) outline the above.
2007-08-03 15:56:26 · answer #5 · answered by Andrea B 3 · 0⤊ 0⤋
The above answers are correct. You friend is wrong, dead wrong.
2007-08-08 12:29:15 · answer #6 · answered by John 3 · 0⤊ 0⤋