Letting loans go into default Forum

[tycoga8118]

I'm wondering what everyone's thoughts were on letting your loans go into default, get sold to a collection agency, and try to settle the debt for a lump sum around 50 cents on the dollar (if that even)? I can't go anonymous so I don't want to reveal too much information, but here is the gist.

My wife and I have around 300k in savings. She will be starting a job that pays a lot of money with a lot of upward potential. I'm within the top 5% at a lower t14 and will be clerking with a federal district judge when I graduate. We also have almost 300k in loans together. I'm not sure what I will do after my clerkship, but if I end up going into a career not eligible for LRAP then I was wondering about this situation. I know my credit would get hurt a lot, but I guess (with a large amount of savings and both my wife and I making good money with good exit options) I don't fully understand any problems that could arise?

I'm starting to seriously entertain this idea because settling our entire debt for 100 to 150k lump sum would be really nice in my opinion. Also, if it matters, about 260k is mine and about 40k is hers.

I'm interested in advice mainly focused on my own personal situation, but all feedback is appreciated.

[kferden]

If you have the means (and it sounds like you do) to pay your debts, don't try to cheat the system. Planning to default on loans just so you don't have to be responsible for your own choices is ridiculously childish and entitled.

ETA: I'm not sure how much it affects your wife's credit but the fact that you're entertaining the idea of dragging her through the mud when the debt is largely your contribution is insanely selfish.

[BlueDiamond]

Yeah, don't be a douche. Pay your debts.

Also, I worked on two student debt collection cases over the summer. As long as the government is willing to fight it out in court.. which in your case they would.. you won't get the collection agency option. You'll pay the full amount on top of any legal fees, court costs, and waste of time. Then, your professional reputation will also be shit and your credit will hit rock bottom.

[lukertin]

You're going to get sued for every cent. 300k in savings? 300k in debt?

rofl. are you seriously even considering this?

[MKC]

1) Get divorced
2) Put all assets in ex-wife's name
3) Default
4) Profit

[A. Nony Mouse]

Would they even let people who have $300K in savings settle their educational debts for a lump sum of 50 cents on the dollar? Most people go into default because, you know, they CAN'T pay, not because they have the money but don't want to spend it on the debt they themselves willingly incurred. Come on.

(Also, defaulting on student loans bars you from pretty much any government job, if that's something that matters to you. It could also cause problems with bar admissions, I'd think.)

[WokeUpInACar]

What the fuck is wrong with you?

[jrthor10]

I'm wondering what everyone's thoughts were on letting your loans go into default, get sold to a collection agency, and try to settle the debt for a lump sum around 50 cents on the dollar (if that even)? I can't go anonymous so I don't want to reveal too much information, but here is the gist.

My wife and I have around 300k in savings. She will be starting a job that pays a lot of money with a lot of upward potential. I'm within the top 5% at a lower t14 and will be clerking with a federal district judge when I graduate. We also have almost 300k in loans together. I'm not sure what I will do after my clerkship, but if I end up going into a career not eligible for LRAP then I was wondering about this situation. I know my credit would get hurt a lot, but I guess (with a large amount of savings and both my wife and I making good money with good exit options) I don't fully understand any problems that could arise?

I'm starting to seriously entertain this idea because settling our entire debt for 100 to 150k lump sum would be really nice in my opinion. Also, if it matters, about 260k is mine and about 40k is hers.

I'm interested in advice mainly focused on my own personal situation, but all feedback is appreciated.

This is the problem with America. All entitlement, no responsibility.

[h_jane_w]

1) Get divorced
2) Put all assets in ex-wife's name
3) Default
4) Profit

YOU, sir, are a genius

[seagan823]

I'm interested in advicemainly focused on my own personal situation, but all feedback is appreciated.

Is this some high quality trolling? Or are you actually like this?

[A. Nony Mouse]

(also, I'm way fucking old and I wish my husband and I had $300K in savings...)

[071816]

stop being such a shit bird

[CO2016YEAH]

I'm not a financial expert nor am I a lawyer, so take this advice for exactly what it is costing you. Looks like after graduation and your clerkship you'll be able to write your own ticket. With the wife in a good job as well you stand to have a pretty awesome household income. It is difficult to part with that kind of money (your savings), but you really already have by acquiring the debt. I'd slam down the payment in full and start scratch. You can invariably borrow for a home or anything else substantially lower than your student loan interest rates. Get the loans out of the way and build equity in a home or other investments with the capital you acquire when you start working.

Between the default period and time it takes you to settle you'll be looking at at least a year to get the loans marked as paid. The default will still stick with you for 7 making it difficult to borrow. You could stand to have a household income around $300k/yr and be unable to purchase any real property. I think the default will be a ball and chain that will serve as more of a PITA than anything.

I'm truly not an expert, but there may also be implications with your bar membership, I don't know. There is also the ethical issue. Yes, you might he able to burn your lenders and save $150k, but you will likely have to explain that to a potential employer or another lender face to face at some point. It will be hard for you to justify how you were able to settle in full with your lenders a year or so after default. In the end, you're probably looking at an ~8 year burden on your credit report, potential loss of employment opportunities, and lost equity and appreciation on a home you might not be able to buy. What does this $150k break down to over the next 8 years and what does this translate to in lost opportunity cost? Also, unless you have that $300k in a floor safe or safety deposit box there is a possibility collectors may be able to discover you have that money and to attain a judgment against it--I'm not sure of this, but I have heard of thing like this happening. You should look into this further; it may not be possible to settle so cheap is you have considerable assets. I'm not sure, but you should look into this.

In short, I don't think this is a very good plan. You should pay your bills if you are able to, and as quickly as possible.

[kferden]

This thread is bad and you should feel bad.

[NanaP]

You have 300K in savings, take half of that and pay down your loans, don't be an idiot

[RELIC]

Unless you are doing private loans they won't negotiate with you. The loans owned by the federal government (as opposed to backed by the Sallie Mae) can't be negotiated like other bad debt. There is no way to get out of paying the full amount unless you do PSLF, PAYE, or IBR.

[tycoga8118]

Thanks for all the responses, but, damn, a little bit too much animosity eh? I was positive that I was missing a lot of problems that would arise with this plan which is why I posted it in the first place. You guys obviously pointed some problems. However, it wasn't really about entitlement and selfishness and all that. It was simply that I thought I saw a decent way to save 150k and wanted advice because I was sure there were problems that I wasn't thinking about.

[A. Nony Mouse]

Thanks for all the responses, but, damn, a little bit too much animosity eh? I was positive that I was missing a lot of problems that would arise with this plan which is why I posted it in the first place. You guys obviously pointed some problems. However, it wasn't really about entitlement and selfishness and all that. It was simply that I thought I saw a decent way to save 150k and wanted advice because I was sure there were problems that I wasn't thinking about.

But the thing is, you could only consider this a decent way to save $150K if from the start you don't see anything wrong with defaulting on loans when you have the money to pay them off. Not sure why you didn't expect to get any animosity for that plan.

[quakeroats]

Assuming you're serious, you're going to want to think about a few things.

1. Bar associations frown on debt defaults, to the point of denying you access to the Bar. I'd read up on the case law in your jurisdiction very carefully.

2. Lenders are hesitant to settle student loan accounts for anything other than full value because they aren't generally dischargeable in bankruptcy.

3. There are lots of ways to hide the money or get it out of your name, but these have to be carefully constructed or you risk a fraud charge.

Bottom line, it would be difficult to do what you're wanting to do.

[enigmabk]

Thanks for all the responses, but, damn, a little bit too much animosity eh? I was positive that I was missing a lot of problems that would arise with this plan which is why I posted it in the first place. You guys obviously pointed some problems. However, it wasn't really about entitlement and selfishness and all that. It was simply that I thought I saw a decent way to save 150k and wanted advice because I was sure there were problems that I wasn't thinking about.

You are so dirty

[enigmabk]

I would shit on you but you're so dirty it might make you cleaner

[jrthor10]

What I really like about this guy's "plan" on second thought is that for him to have both 300k in savings AND some debt under his belt, he has thought of this plan previously. Why else not just pay for law school out-of-pocket if you're able to vs. taking on all the interest, origination fees, etc.

Either this guy is very dumb, very evil, or a mixture of both.

[jrthor10]

And fuck, you go to Gtown? My undergrad degree was looking a little dirty recently...

[reasonable_man]

Welcome to the profession - you're going to make a splendid addition; I'm sure.

[suzige]

No.