What truly happens if you simply CANNOT pay your loans?

Started by sozetone
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sozetone

sozetone

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Guys,

A lot of new grads are struggling. I know many. Does anyone have experience with NOT paying your loans. I mean, once you are out of deferment time and forbearance options...etc. and simply HAVE to not pay to HONESTLY survive. What happens to a person besides ruining your credit? Arrest? i dunno....just wondering.
 
Many states have laws where if you dont pay the loans they will not grant you a license or put it on hold.
If you borrowed the money better be prepared to pay it back.
 
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BigBoss said:
That's why the gov't has repayment options like PAYE and REPAYE for those who are struggling.
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What about the students who go to diploma mills like California Northstate University who are not even eligible to borrow federal loans and end up borrowing $320k+ from Sallie Mae? What are their options?
 
With REPAYE, PAYE and/or 25 year amortizations this doesn't really happen.

But to answer your question, the feds can garnish wages, tax refunds and social security if you happen to default on federal student loans.

If they are private loans, there isn't much they can do besides destroy your credit and run up the interest. But remember, barring complete and total disability or literal death, even private loans cannot be discharged in bankruptcy.
 
DOOM N GLOOM said:
What about the students who go to diploma mills like California Northstate University who are not even eligible to borrow federal loans and end up borrowing $320k+ from Sallie Mae? What are their options?
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30 year re-amortization.

So, yes, literally lifetime indentured servitude.

I ran the numbers, at 6.8% for 30 years at $320k principle. $2000 a month for 30 years.
 
DOOM N GLOOM said:
What about the students who go to diploma mills like California Northstate University who are not even eligible to borrow federal loans and end up borrowing $320k+ from Sallie Mae? What are their options?
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If you tried explaining the difference between federal and private loans to a California Northstate student they'd probably stare at you with a rather dull expression on their face.
 
There will likely be a shooting war to provide an excuse for lost dollar hegemony. Though I can't see mass mobilzations of human troops like WWII. The weapon systems are simply too horrific. Even the aircraft carrier is obsolete. But if they need cannon fodder...all the collateral for these loans could be called.

If there's one lesson to take home from The Empire Strikes Back, never get in bed with the Empire.
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Unless you are a ***** in regards to budgeting and personal finance AND you've let lifestyle inflation seize your cojones, this situation won't happen.

Better start selling **** you don't need OP.
 
Pretty Pretty said:
There will likely be a shooting war to provide an excuse for lost dollar hegemony. Though I can't see mass mobilzations of human troops like WWII. The weapon systems are simply too horrific. Even the aircraft carrier is obsolete. But if they need cannon fodder...all the collateral for these loans could be called.

If there's one lesson to take home from The Empire Strikes Back, never get in bed with the Empire.
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Lesson 2: You can always count on Lobot.
 
Nothing happens (well, apart from your loans accumulating interest).
Knew a guy who failed from Carib med school with 100K+ debt. I don't believe he is paying off those loans
 
Even if they don't get a Rph job there's no way they can't pay ANYTHING. They'll have to swallow their pride and wait tables, drive for Uber, work a regular retail job at Staples or whatever.

It would be easier to get an Rph job in BFE and pay the loans off in 2-3 years and be done with it.
 
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Chriskahn said:
The board can suspend your license until you start repaying your loans again. But there are many repayment options that have $0 to very small amounts like $30 a month until you find a job and start making money
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Suspend my license? oh no! you mean i wont have to work as a pharmacist anymore? that's actually perfect! lol. they can have a few bucks a month from waiting tables or whatever. I give up on this dead end profession.
 
Pretty Pretty said:
At some point there's an ethical duty to default. What we have here is systemic fraud in the inducement.
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so what you are saying is not paying is inevitable? and should be done to continue this course of action? i would probably agree.
 
sozetone said:
Suspend my license? oh no! you mean i wont have to work as a pharmacist anymore? that's actually perfect! lol. they can have a few bucks a month from waiting tables or whatever. I give up on this dead end profession.
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If your credit score is destroyed then you can’t buy a house and you would have a hard time renting.

You decided to go to pharmacy school. Didn’t you do your research beforehand?


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BMBiology said:
If your credit score is destroyed then you can’t buy a house and you would have a hard time renting.

You decided to go to pharmacy school. Didn’t you do your research beforehand?


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Give the kid a break. Don't you remember how stupid you were at that age. Even if cognizant of the math, the social inertia to go to school is relentless.
 
Pretty Pretty said:
Give the kid a break. Don't you remember how stupid you were at that age. Even if cognizant of the math, the social inertia to go to school is relentless.
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I was stupid back then but I at least took ten seconds to Google the job prospects of the degree I pursued. I wanted to go to law school ten years ago but a quick search told me there were no jobs so I chose something else.
 
awval999 said:
30 year re-amortization.

So, yes, literally lifetime indentured servitude.

I ran the numbers, at 6.8% for 30 years at $320k principle. $2000 a month for 30 years.
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with PAYE, it's 10% of your monthly income for 25 years, isn't it? so if one makes about $8000 a month after taxes, 10% of that a month isn't going to break your bank. if you have 401k or other investments where you won't be taxed on, monthly payment will be lowered. I'm paying about $650 a month right now. that's about 200k at the end of 25 year term which is FAR less than what my total amount is lol
 
VictorOfHungerGames said:
with PAYE, it's 10% of your monthly income for 25 years, isn't it? so if one makes about $8000 a month after taxes, 10% of that a month isn't going to break your bank. if you have 401k or other investments where you won't be taxed on, monthly payment will be lowered. I'm paying about $650 a month right now. that's about 200k at the end of 25 year term which is FAR less than what my total amount is lol
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You do know you need to pay taxes on any “forgiven” amount right?


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BMBiology said:
If your credit score is destroyed then you can’t buy a house and you would have a hard time renting.

You decided to go to pharmacy school. Didn’t you do your research beforehand?


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Click to expand...

Yes and in 2003 when i started my pre-recs i had been a tech since 97 and loved the occupation. The field was booming, we were in demand. I am not some new grad who thinks it wont happen to me, ok? thanks.
 
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What happen if you take a large loan from the government and you don't finish pharmacy school? I have a friend in this situation. Will he get screwed when he take a low paying job?
 
dmd20000 said:
What happen if you take a large loan from the government and you don't finish pharmacy school? I have a friend in this situation. Will he get screwed when he take a low paying job?
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They will ultimately garnish his/her wages aka take a percent every month. He should look for a job that pays under the table such as construction or waiter.

awval999 said:
President Trump
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Not my president. He lost the election in the popular vote which is the only vote that really counts. His presidential appointment is illegitimate and I don't recognize him as my president. Hopefully he ends up in jail soon for tax evasion and lying under oath and Russian corruption.
 
BenJammin said:
It is absolutely criminal that pharmacists are eligible for any sort of student loan forgiveness. I'd love to see Trump put an end to that nonsense.
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You realize Trump's government takes out loans from China and Japan every year due to Trump failing to correctly budget via congress? If anything he needs to be arrested for incompetence. How much does the US owe in debt? Trillions? RIP the US.
 
BMBiology said:
You do know you need to pay taxes on any “forgiven” amount right?


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Click to expand...

Yes, from what I understand we need to pay taxes on the remaining interest, not the principle. I did the math, it's still much less than paying the whole thing off. At the end of 25 year term, tax on interest would be in the $35k -$40k.
 
VictorOfHungerGames said:
Yes, from what I understand we need to pay taxes on the remaining interest, not the principle. I did the math, it's still much less than paying the whole thing off. At the end of 25 year term, tax on interest would be in the $35k -$40k.
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This is not a student loan forgiveness thing. It is an IRS thing. Any forgiven amount, principle and interest, is considered as taxable income.


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sozetone said:
Guys,

A lot of new grads are struggling. I know many. Does anyone have experience with NOT paying your loans. I mean, once you are out of deferment time and forbearance options...etc. and simply HAVE to not pay to HONESTLY survive. What happens to a person besides ruining your credit? Arrest? i dunno....just wondering.
Click to expand...
I am familiar with an individual who went to pharmacy school and is declaring bankruptcy. There is that possibility but it is a hard sell.
 
lord999 said:
I thought there were hardship deferments when it is actually impossible to pay the federal side of student loans. Even IRS won't go after those.
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Extremely hard to prove hardship in court outside of a serious traumatic car crash that leaves you blind, paralyzed, ect.
 
Three things:

1) Defer long enough to qualify for a minimal 30 hr week job in a 501(c)3 nonprofit organization. File for Public Service Loan Forgiveness and make adjusted payments for 120 months. Despite what the IRS is known to do, they cannot have you pay taxes on ANY of your consolidated federal loans (organization is exempt from federal income tax anyway).

2) Join the military

3) Sit back and watch the agency garnish your wages while your credit dives down...‘tis life
 
Modest_anteater said:
Not my president. He lost the election in the popular vote which is the only vote that really counts. His presidential appointment is illegitimate and I don't recognize him as my president. Hopefully he ends up in jail soon for tax evasion and lying under oath and Russian corruption.
Click to expand...

Move to Canada. I hear everything is always better there anyway....
 
I wonder if any health professional would have the balls to claim insolvency to avoid the tax bomb on loan forgiveness. Employed pharmacists (not underemployed working 24/week) should make enough to accumulate a decent chunk of retirement savings but if you're totally screwed in terms of job opportunities perhaps you could invoke this.

2+ decades (IBR or PAYE) is a long time

Example: Defusing the Student Loan Forgiveness Tax Bomb
 
Sine Cura said:
I wonder if any health professional would have the balls to claim insolvency to avoid the tax bomb on loan forgiveness. Employed pharmacists (not underemployed working 24/week) should make enough to accumulate a decent chunk of retirement savings but if you're totally screwed in terms of job opportunities perhaps you could invoke this.

2+ decades (IBR or PAYE) is a long time

Example: Defusing the Student Loan Forgiveness Tax Bomb
Click to expand...

The IRS can go after your 401 k and count it as an asset. I guess you can skip your 401 k but that means you will also be skipping your matches and pre-tax savings.


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BMBiology said:
The IRS can go after your 401 k and count it as an asset. I guess you can skip your 401 k but that means you will also be skipping your matches and pre-tax savings.


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Click to expand...

I don't think they can go after 401k.
It's a protected ERISA account.

EDIT: Of course the long arm of the IRS can reach an ERISA account. That and your ex-wife 🙂
When Your Retirement Accounts May Not Be Protected
Although your retirement accounts are generally safe from your creditors when you file for bankruptcy, there are a few exceptions.

  • If you withdraw money from a retirement plan, it is no longer protected.
  • These rules only apply if you file for bankruptcy.
  • If the IRS has filed a valid tax lien against you, it may be able to reach your retirement assets.
  • Divorcing spouses may have access to your retirement accounts.
 
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Sine Cura said:
I wonder if any health professional would have the balls to claim insolvency to avoid the tax bomb on loan forgiveness. Employed pharmacists (not underemployed working 24/week) should make enough to accumulate a decent chunk of retirement savings but if you're totally screwed in terms of job opportunities perhaps you could invoke this.

2+ decades (IBR or PAYE) is a long time

Example: Defusing the Student Loan Forgiveness Tax Bomb
Click to expand...

Yes, nurses had a fairly high delinquency rate (that's why they are easy to recruit to VA).
 
awval999 said:
I don't think they can go after 401k.
It's a protected ERISA account.

EDIT: Of course the long arm of the IRS can reach an ERISA account. That and your ex-wife 🙂
When Your Retirement Accounts May Not Be Protected
Although your retirement accounts are generally safe from your creditors when you file for bankruptcy, there are a few exceptions.

  • If you withdraw money from a retirement plan, it is no longer protected.
  • These rules only apply if you file for bankruptcy.
  • If the IRS has filed a valid tax lien against you, it may be able to reach your retirement assets.
  • Divorcing spouses may have access to your retirement accounts.
Click to expand...


Withdraw it as cash and stick it in your fridge [emoji23]


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Pretty Pretty said:
At some point there's an ethical duty to default. What we have here is systemic fraud in the inducement.
Click to expand...

Ethical duty to default. . . . . Absurd in the extreme.

Yes, the student loan program is a mess, yes colleges/universities are cashing in on the stupidity of youth/parents. People buying into the idea that they can get a random degree, pay whatever it takes, take as much time as it takes, and they will have granted them economic freedom and stability is equally absurd.

I think the government should get out of student loans, but the idea that you don't own the money you borrow is silly. The current situation of skyrocketing tuition, and lower utility of degrees, development of for profit colleges are all unintended, but easily foreseeable consequence of the current student loan program.
 
NITRAS said:
Ethical duty to default. . . . . Absurd in the extreme.
Click to expand...

Why absurd? Student loans have more stringent contractual terms and greater lender recourse, sure. But defaulting on a loan is already built into every repayment contract that exists out there (mortgage, car loan, etc...)

You sign and are given a choice. Pay and you have option A happen, don’t pay and you have option B happen. I remember advising dozens of people to strategically default on their mortgages because a) I had a fiduciary duty to them and b) option B resulted in a much better individual outcome than option A.

Macroeconomically it was a bloodbath, but individuals do not have a duty to their fellow man. A tragedy of the commons, if you will.

Contracts are just starting points for negotiation, in general. Student loans just have a different calculus behind them.


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