Get Out of Debt Guy

Getting Married With Defaulted Student Loans and Need Help

Posted September 19, 2013

WRAL Reader Question

Dear Steve,

I am in a lot of debt mainly student loans (defaulted) and some medical. I am trying to get on track financially as I am getting married. My fiancé is aware of my status and has some credit issues as well. We have been very open with each other. Basically being young and making bad decisions.

We are about to start looking at bank loans for purchasing a home. I am aware are chances are slim, but he says its no harm in trying. I am currently about $37, 0000 in default on student loans, I am already working to payback two other debt accounts.

My questions is how do I get my head above water, how can I clear this debt? I don't want another account going to collections. should we even bother looking for a house or loan?

Miranda

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Dear Miranda,

You are doing a lot of things right here. Being open and talking about the overall situation goes a long way towards dealing with financial problems. 

By your own admission you've made some mistakes. You can look at it as a negative or you can see it as a lifelong learning opportunity. The worst mistake is the one you don't learn from.

Before you leap to get a mortgage it makes logical sense to tackle the student loan issue first. Besides the fact the defaulted student loans may be negatively impacting your credit score, my bigger concern is if you base what you think you can afford each month on your current income, you're not factoring in student loan payments.

Some amount of your income should be going towards the student loans and if you started planning what kind of mortgage you could afford without making the student loan payments you could be sunk if you get sued and are forced to make the payments.

So here is what I would suggest, read this guide to get your student loans on track. If your loans are federal student loans there are some great options. If they are private student loans then it is even more important you workout a repayment plan now.

Once you get the student loans under control you'll have a better idea of what you can really afford for a mortgage payment. That would be the time to meet with a local mortgage broker who represents a number of different mortgage companies. They could advise you how big of a hit your credit has taken because of the delinquent loans and what that will cost you in an increased interest rate if you got a mortgage today.

You might discover once the student loans are on an agreed payment plan your credit score will significantly improve with some time and regular payments. That may make the mortgage cheaper and more affordable in the long run.

Steve

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.