Default On a Student Loan? Sallie Mae Won’t Break Your Legs, But They’ll Come Close.

The past 4 years have been especially hard for many.  Much of the middle class, now formerly middle class, finds itself stranded on the mud flats of credit as the economic tide has gone out.

In desperation many sought refuge in college paid for with easy to obtain federal loans.

Just wait out the economy many thought, good times will be here again soon. Many thought that greeting a newly rising tide with a fresh degree made a lot of sense.

The only problem is the tide has not rolled back in and now the people who lent the money, the Federal Government, want to get paid back.

To this end the Feds have amassed an army of private debt collectors to pursue those who have defaulted on their loans. Many of the people who have defaulted are in the midst of terrible personal financial trouble to begin with. That is why many of them defaulted, of course. But a pound of flesh is a pound of flesh and the beast must be fed.

If one signs a contract one has an obligation to adhere to that contract so long as it is not coerced. It doesn’t matter that one was young and didn’t understand the concept of interest. You made a bonehead move and now you must pay what you owe. Contracts must be adhered to for a free society and economy to work.

But saying this however it should be remembered that the feds are making money off of these loans which supposedly exist for the betterment of the populous at large. The government gets (nearly) free money, you do not.

It must also be noted that the rules that apply to the wayward student who owes $25,000 do not apply to the big banks. If one is a big bank and one can’t pay one’s bills, a phone call to the Federal Reserve usually solves the problem. Soon freshly “printed” dollars find their way into the troubled bank and, presto, no more default.

Think also of all the people who have defaulted on credit cards issued by the likes of Wells Fargo and Bank of America during the “Great Recession.” The banks were able to pony up to the Fed window to get out of trouble. The credit card holders had no such luxury.

Indeed many of the banks who now come after defaulted individuals managed their books far worse than many of their shamed former clients.

The same could be said for the government.

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10 comments
Truthbtold2no
Truthbtold2no

I actually had a payday loan lender say to me, "Do we have to send some people over there to break your legs for our money?" He was not joking either!

richard courtney
richard courtney

My daughter has a sallie may loan , she got an assoiate degree in medical transription then went back to school and got a certificate in the MA field. Now the herassment begings. Now instead of working out a sechdule for repayment they are going after her and myself. I have made several calls to them because they leave a message on my anwsering machine about three days a week. The people you talk to only want to hear one thing yes sir or mame I will pay in full. If you suggest any thing else they threaten to end the call because you are being beligerant. She is having a real hard time with her finaces right now but they don't want to hear that nore do they care.All they seem to care about is the money,if they would give her a differant payment schedual something she could manage right now THEY WOULD GET PAYED.but they don't seem to want to do anything like that, they would rather herass myslf and her.

duo_viper
duo_viper

The vast majority of students that default on loans don't intend on defaulting. Just about all of them do everything they can to keep their debts paid on time. But life happens. Not everyone with a job keeps it forever. People get downsized. People get illnesses. Family situations happen. The problem is private lender's complete & total lack of willingness to work with borrowers with hardship. And when a lender is unwilling, often times a borrower's only option is to default. When you become injured on the job & your disability prevents you from working outside of the home, and Sallie Mae will stop at nothing from getting their XXX.XX per month... what can you do? Default happens.

USCitizen
USCitizen

Great article, the issue you raised speaks to the central economic issue of our time! Banks got BAILED out-AFTER- proven fraud, deciet, chicanery and all other sorts of malfeasance. The idea that individuals must somehow prove how responsible we are by paying for these criminals, while they run governments and PRINT worthless paper to indebt our grandchildren is preposterous. Banks won't even reduce principals on mortgages in severely depressed regions like Ohio, yet they infamously took TAXPAYER dollars when they could get them. Legally when a transaction originates as fraud IT IS NOT VALID, and MOST of what the big banks have done over the last at least ten years IS FRAUD!!! Libor =fraud, derivative=fraud, discount window=fraud etc etc etc etc =fraud. Which is why all the majors rushed to settle with the states with respect to housing fiasco, they are ALL GUILTY OF FRAUD!!

Mtnskunkman
Mtnskunkman

You took out the loan---pay it back.  I never defaulted on a loan in my life, no matter what my employment status was.  There are many different ways to earn a living.  Get a job and pay back your obligations.  You signed the contract so pay it back and stop your bellyachin.

RainfromNYC
RainfromNYC

@duo_viper My issue has always been that any payment plan Sallie Mae offers me does not allow me to even TOUCH the principal. So I could be paying $300 a month, but it's all going towards interest, and they will roll over the difference.

I would have no problem paying the loans I took out...it's the 250%-and-climbing markup that I am having a problem with. :-/

Just_A_Cog_#11273
Just_A_Cog_#11273

This is a totally new breed of loan system. It is predatory to say the least, especially private loans. You cannot bankrupt, you cannot consolidate (at least with Sallie Mae), you can pay interest only for a couple years (about 45% of your monthly payment might I add), or you can put it in deferment during which interest accrues daily.  Those are the options for relief.   Private loans do not fall under IBR, or ICR, you will have to pay or suffer the rest of your life in these non-dischargeable debts. You think the Housing Bubble was bad? Wait for the Student Loan Bubble.  This debt encompasses my life and I am not even 30. I pay $550/mo and will do so for the next 25 years, over a college degree that isn't worth the paper it's printed on. I will be 40 before I can even think of buying a home. Afford a family?...well I don't know... :( Stupid and naive makes for a very painful Hindsight 20/20.  This system was not the same as recently as 10 years ago. I dare you to do your research, because this generation is royally f*ckd you selfish, selfish person.

Rio
Rio

Mtnskunkman -- You are officially a fXXXXXXX idiot.  This is not a moral obligation this is a business decision my friend, and should be treated as one by borrowers.  Just as the bank price interest rates associated to risk using caluculation and deviatives, borrowers most leave the moral and obligation arguements to the way side.  THIS IS A COMPLETE BUSINESS DECISION, take a look a your numbers and figure out a solution.  Work Visa, are a great way to get out of the debt  that the Bush adminstration lobbists somehow enacted on private debt even thorough it was already impossible to default on Government backed student loans prior to 1980s.     I have actually payed back the little amount od student debt I took out, but by no means should borrowers stop eating instead of paying their student loans.  Seriously, what would be worse, living on peanuts and having wage garnished or moving to canada/mexico/europe and establishing a career and life debt free....