Get Out of Debt Guy

Can the Obama Student Loan Program Really Help Us?

Posted January 8, 2015

Dear Steve,

So this is less my situation than my partner's. Ryan had a bit of a rough patch in his younger days - a pretty long one actually - and managed to rack up a school loan debt without managing to graduate college. He has $18,000 on the books right now that has been deferred for years for different reasons. Obviously this cannot be done forever and the period is soon coming to a close (or at least the period for which he is willing to defer). We have a new and expanding business along with the debt that comes with it and now we are also responsible for a mortgage. The idea of having yet another monthly payment is a nightmare to me.

There have been several updates to my knowledge base that prompts me to ask these questions. One is that Obama has apparently recently passed debt forgiveness legislation. I am not too familiar with it and am wondering if we can take advantage of this since Ryan is horribly low on income at the moment. Since Ryan never graduated school, I am worried that this program will not apply to him.

I have also recently heard that when a debt is delinquent, the loan company or school then sells this debt to a collections agency but does not supply sufficient paperwork to actually prove that this debt is owed or how much is owed because the transfer of such documentation is so sensitive that it would open up potential privacy litigation.

As a result, if they do take you to court, you just have to ask for the paperwork accompanying their claim and, since they don't have it, the case will be dismissed. This sounds too good to be true, I know. That's why I am questioning it. However, Ryan is willing to take the hit to his credit report for the 7 years that it would be affected (as all of his major loan activities are essentially covered now - hopefully nothing huge in the future) if his debt will eventually just disappear.

I did read your last article to Matt about his situation with NCO and this makes me, predictably, nervous. Ryan and I are not yet married, but we are considering it for many reasons. Marrying our financial histories, however, may destroy my record, which is perfect right now, at least for my income level. I need to know how bad collections could be and how long his record would be tarnished.

If neither of these options are real options, is there anything else that you would recommend we do to take care of this? Can banks look back at your record in collections and see how much money you are delinquent in? Does that go away also in seven years?
Thank you for all of your help!

Julie

…Click here to read my answer.

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.