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Sallie Mae Signature Loans
Question: I presently have signature loans from Sallie Mae. They are personal loans and not federal student loans. They are driving me to illness. I have offered to make partial payments but they refuse and say they will still attack my credit history for not paying. They also say they will add 25% to my loan if I don't make the payments on time. This willhappen within the next few days! Is there a way i can reduce my monthly payments without hurting my credit?
Answer: Thanks for visiting Bill.com.
I am sorry to hear that you are struggling to repay these private student loans. Unfortunately, you have found yourself in a situation experienced by thousands of Americans every year. The rising cost of higher education, coupled with the increased demand for a college degree in the American workplace, has caused a large percentage of students to incur tens of thousands in debt to finance their education. When they graduate, and are not able to find a job with the salary they expected, many are left unable to repay their loans. It sounds like this is the situation in which you have found yourself.
Bills.com has a wealth of information about Student Loans at Student Loan Information
Several possible solutions to your problem come to mind. Although your previous experiences with Sallie Mae have been less than pleasant, they may be able to offer you a private consolidation loan to lengthen your repayment period, perhaps lower the interest rate and lower your monthly payments. You could also contact other private student loan lenders, such as Collegiate Funding Services, as an alternative to consolidating your loans with Sallie Mae. You should also consider a debt consolidation loan–the Bill.com Savings Center is a great resource to find a debt consolidation loan that may fit your needs.
There are basically two types of consolidation loans–unsecured and secured. In your case, I doubt that an unsecured loan will be of much benefit, since
your current interest rates with Sallie Mae are probably better than a bank could offer you on a standard unsecured loan. If you are a homeowner, a debt consolidation loan secured on your home may also be an option, though you should be careful before you borrow money against your home to pay off these Sallie Mae loans; you would be converting what was previously unsecured debt into secured debt. This could cause you problems down the road if for some reason you are unable to make your mortgage payments, or if life’s circumstances force you to file bankruptcy. If that is an option, or to explore this alternative, you can apply with Bills.com's network of providers by applying here:
https://www.bills.com/mortage/refinance/
In fact, total bankruptcy (Chapter 7) will probably not be of direct help to you on these debts. In past years these kinds of debts would have been dischargeable in bankruptcy. However an amendment to the bankruptcy Code effective in 2005 specifically made these private student loans non-dischargeable. Therefore, the only way total bankruptcy could help is to free up future payments on other debts which are dischargeable to be applied to these non-dischargeable ones. Chapter 13 bankruptcy (commonly referred to as an income-earner’s bankruptcy) could help by increasing the repayment period, thus lowering the payments on these loans, but only if the current repayment period is less than 60 months. Generally the repayment periods on student loans are very extended, so I doubt that you will find Chapter 13 of any help, but give it a look with a qualified bankruptcy attorney (for a free
consultation). I will be happy to make a referral if you write back and ask for one.
Credit counseling will not help very much because its benefits to most consumers are pretty limited on the debt management side. It could provide some help in budgeting and planning, but you cannot budget yourself into making payments if the money to make them simply is not there. A Debt Management Plan (DMP) would hurt your credit report substantially. Debt settlement could free up funds to keep you current on these loans, but your credit report will take a hit, at least at first. That is one reason that I always advise debtors not to undertake a Debt Settlement Plan (DSP) unless they have a reasonably good chance of completing it. Again, any gain to your ability to keep these accounts current would come indirectly from the general improvement in your financial condition resulting from the DSP. You would not be permitted to put these accounts into the DSP since they are treated the same as government insured student loans.
In short, due to the unique characteristics of this type of private loans, replacing them through consolidation is by far your best alternative with Chapter 13 bankruptcy a remote possibility due to the limited time that a Chapter 13 case can be maintained. Whatever you decide to do, I wish you the best of luck.
Thanks for writing; please don’t hesitate to write again with any follow-up questions you may have.
Sincerely,
Bill
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