My wife stays home with our son and she (we?) owes approximately 15K on her student loans. I'm wondering what would happen if we simply stopped paying them. She doesn't have wages to garnish, but we obviously file our taxes jointly so I'm guessing that would figure into the equation if we were owed a refund or something (I try to always owe, though, no need to loan the gubbermint money at no interest).

Anyway, I'm just trying to figure out some options here. We are very very "poor" according to today's society. Heck, neither one of us even has a smart phone. And no cable! Might as well be living in a cave I reckon. I make around 37K a year and even though the student loan bill is not that much, every dollar makes a difference in our budget.

I know that anything I read here shouldn't be used as legal advice, etc. Just trying to get a feel for my options. Thanks.

ETA: Her debts were incurred before we were married and we're in NC which I don't think is a community property state.

Hey NMA -

You can contact the lender and ask for a forebearance or a deferment. Those options may help to give you a little breathing room until you can get the cash coming in.

If you stop paying the balance will increase - rapidly.

I don't know if "they" could go after your wages or not - probably so I suspect.

Do you own your house? They'll put a lien on it.

Do you get a tax refund? They'll take it. I know you answered this - but conditions change.

Are you going to want or need to borrow in the future - house, car, etc. If you quit paying it will effect that.

They will take your SS payments.

Since your wife is a stay at home wife an option would be for her to watch another child along with your own child (in your home or the other parent's home)to get some more income coming in to just pay off the debt....Just one other couple while working paying you $100/wk for one child for 3 yrs would cover it....$100/wk x 52wk/yr x 3/yr=$15600....Don't get crazy with taking on a lot of kids because you don't want to run afoul of any daycare type laws in your state....Stick more to the nanny type classification....If she were willing to do light cleaning of the other parent's home....all the better as I think she'd be snapped up....Again though....be sure to check this out with your own state laws....Lastly, I just pulled that price of $100/wk out of thin air so see what the going rate is around you....

Here is a link to the student aid postponement page:

http://studentaid.ed.gov/PORTALSWebApp/s....

There are a bunch of different options depending on the type of loan and thype of financial need/situation.

Don't just stop paying! The interest piles up and your credit gets permanently trashed....and it never goes away.

You might want to reassess when it comes to your conclusion that with an income of $37,000 a year you are "very, very poor." That perspective would indicate that you're measuring yourself according to a very different standard, and possibly running with a very different crowd, than you should be.

You really need to ask a lawyer this question. I'm 99% sure that they can't touch YOUR salary. Doubtful even on tax refunds, if she isn't earning income. HOWEVER, what they are allowed to do & what they actually do are 2 separate things. And if they "accidently" garnish your wages or taxes, it could take months or even a couple years to straighten out.

What is the interest rate on the loans? What is your minimum monthly payment? Where do you live?

The child care suggestion is excellent. It will give your child a chance to socialize and may give your wife a moment to accomplish some household chores while the kids interact (depending on their ages). Some age disparity is not a bad thing either. That gives an older child some self-esteem and a younger child a role model.

Rather than wasting energy figuring out how to work the system, work your way out of the system and be free.

Yep it looks like "not paying" is the absolute worst thing we could do. My wife's name is on the deed to our house, so even though NC isn't a common property state it wouldn't matter. We'd still get smacked with a lien. And the debt would exist forever anyway.

The child care idea is a great one and there are some families around in our neighborhood where both parents work, so that could be a win-win. We get some extra cash to pay this debt down, and our neighbors get to save some money on child care. I tend to dislike the idea of deferment or forbearance because the interest just keeps piling up. It's like a fake reprieve.

Side note: when I said we were "very, very poor" that was tongue in cheek. Sure we have our financial stresses, but we do manage to have a positive savings rate specifically because we don't have all the trappings that society seems to require to be considered well off. I couldn't care less about cable and as long as my cell phone makes and receives calls, that's all I need. My paid-for, 12 year old truck runs great even if it isn't nice and pretty. I do get a little drained about having to pay on this loan when the education it bought isn't being used to produce income, but that's not the lender's fault anyway. It's a choice we've made, so we have to deal with it.

Thanks all for the advice.

They'll take your money, but you can file an "injured spouse" claim and get it back.

Read more info on how people who stop paying get penalties added. You want that to be 50K you owe?

And I know they took tax returns from people I knew in the past if the person who owes the money has their name on the return. So odds are your wife doesn't have to work but they can take your tax return.

Not sure if they can do anything with bank accounts but if her name is on it.....

Just MHO but if you don't pay it, I think you will regret it.

If you already have an emergency fund & no other debt, I'd buckle down & apply all extra income towards the student loans. The daycare idea could be good, unless the state gestapo gets involved.

Do you mind telling the interest rate on the loans? I'm really curious. Thanks.

Student loan debt is not dischargeable in bankruptcy in the US.

Keep paying the loan.

Her student loan, and increasing penalties and interest will be with her till she dies. Or the laws change, which is unlikely.

Immediately when she defaults, they will tack on 20 to 25% in penalties and costs, and she will incur higher interest rates. Those interest rates will continue to compound till the balance is paid. At some point, that $15,000 will be $50,000.

Forebearance will simply cause interest to be charged.

No way out in the US, other than teaching or one of the other programs which will take the place of paying the loans.

Much better option would to rack up your debts while diverting money to pay off the student loans. Then let the debtors hold it, while the student loans are paid off.

Do not default. She will really wish she had not.

Pay her student loans off. Use strategy for some other aspect.

The rate is 5%. Part of the reason I'm asking about this is that while we do have some savings, we don't have nearly enough to qualify as an emergency fund. To my mind, the emergency fund is more important but "not paying" on this loan simply isn't an option. And again, deferment and forbearance just adds capitalized interest to the balance so it seems like a bad idea to me.

Quote:

You might want to reassess when it comes to your conclusion that with an income of $37,000 a year you are "very, very poor." That perspective would indicate that you're measuring yourself according to a very different standard, and possibly running with a very different crowd, than you should be.

I agree TickerFan. I try my best to sort my friends and possible friends not by character or familial ties, but by income bracket.

When attending any event I wear a T-shirt with my annual income stenciled on it; speeds things up.

What Flaps said..you can file as an "injured spouse" and they won't take the money..
As far as future law..watch the debt forgiveness in about 5-10 years on student loans..this forum has pointed out just how insane the amount of debt is and guess what? It will be the next "bailout".

As ****ed as housing is do you not think that in order to get people to buy the ageing/dieing boomers houses they will start erasing the loans? As it has been pointed out may times on these forums young adults have ZERO CHANCE to buy these debt boxes off the older gen as they die or downsize due to the student loans and lack of jobs they're starting out with..

Bailout v.2.0 Student debt...coming soon to an economy near you..

I'll go ahead and make a prediction now...

Within 10 years everybody that bothered to struggle and pay down student debt will be sitting back thinking of themselves as suckers in the same vein that now current savers/housing bagholders view themselves as they watch the irresponsible get rewarded..

Quote:

do you not think that in order to get people to buy the ageing/dieing boomers houses they will start erasing the loans?

Possibly. They also may start balancing the budget.

There is a huge education industry out there with tremendous political pull. They are dependent on these loans. Start erasing balances, and they will believe it will lead to decreased student aid.

Hell, I don't think there should be federal loans for post secondary education. But there is no way I suggest to someone that they are likely to be forgiven or a debt Jubilee for them.

I would dare to suggest that the post secondary education industry is more politically connected than real estate and construction.

" and they will believe it will lead to decreased student aid." This would certainly help the out of control cost spiraling ever upward..

" Hell, I don't think there should be federal loans for post secondary education. But there is no way I suggest to someone that they are likely to be forgiven or a debt Jubilee for them. -- agree with first statement as to the second...while I believe the likely hood is high, I would hope he wouldn't take a random online prediction and start making life impacting decisions on it :-)

" I would dare to suggest that the post secondary education industry is more politically connected than real estate and construction." ------ Herein lies the problem...

Student loans will only be "bailed out" if it benefits the banks. My guess? .gov will take our tax dollars to make the banks whole & then deduct payments from social security as people who have loans, retire.

Buy an assault rifle and run amok at the institution you owe the money. It's the only way out.

Jstanley01 wrote..

Buy an assault rifle and run amok at the institution you owe the money. It's the only way out.

Not really, because after I end up bullet-ridden I'm pretty sure my wife would still owe the money...

Anyone have any thoughts on building up an emergency fund versus paying off this debt as fast as possible? As it is we could probably make it about two months if I lost I job, maybe three.

Thanks again for everyone's input on this.

I think most people advise 3 months. However, in these economic times, I like Suze Orman's advice...8 months of expenses. I know it seems like alot...but if you lost your job, you'd be thankful.

I not in a position to "need" to do these things right now. But, if I had too, I could seriously cut my electric bill...by solar cooking. You can build your own solar over with scraps around the house & a few dollars; line drying clothes; couponing (which I do). When I was really into couponing, our grocery bill went from over $600 a month, down to about $175. I'm not that hard core anymore. Your wife should try to do something to either generate income (childcare) or reduce outgoing expenses (or better yet, both) If she doesn't want to do childcare during the day, another option is babysitting Fri & Sat nights. Lots of people are looking for a reliable sitter. This could bring in another $20 night/$160 month to apply towards the student loans.

I would do what I could to try to scrape together another $100-$200 a month to apply towards the student loan.

List your monthly expenses; make sure the list matches what you actually do spend (don't forget to list the fast food lunches & Starbucks). Then make a mental decision to attack this student loan & get rid of it asap. Then start cutting back anywhere you can.

Can your wife put her degree to some use? Does she (or you) have a hobby that could generate some income?

By the way, what interest rate are you paying on your mortgage? Are you upside down? If not & this is a home you'll be at for awhile, you might consider refinancing at a lower rate.

Not upside down on the mortgage even though we bought at the height of the bubble. Rate is 4.25 and the payment is manageable. I doubt we could rent for less and if we sold right now we'd probably make a grand at most, if that.

We're going to map out this child care idea I think. I think we could make a serious dent in this debt if we could pull in an extra hundred bucks a week, which seems doable. Unfortunately we've cut everything else to the bone. No car payments, no cable, well water, septic. Actually I take that back, we could still cancel internet and cell phone service if it came to that.

I do have the ability to make extra money in my field, and I do extra jobs as they come along. The rate that they come along is incredibly low unfortunately, as my profession is dependent on the construction and housing sectors. Still, there are options for us here and I appreciate everyone's input.