Question:
A friend of mine owes about 10,000 dollars plus interest on a guaranteed student loan. He graduated and has a job, a condo, and a year old baby, and can't afford the $140/month payment. He tried calling the people at Student Loan Services and he talked to them. He wanted to try and get the monthly payments reduced to about 80,90, or 100 dollars/month, but they would not work with him. So, they sent the loan info to the Guarantor (State of Florida) and he is in a default status, even though he wants to pay the thing back.

He tried to get help from the County Credit Counseling service, but they said they could not help with student loans. He wanted to get in touch with whoever the Guarantor is, but was told by Student Loan Services that he can't call them, he has to wait until they call him. Now he's all worried about what's going to be done to him, etc. Can anyone shed light on what can be done to him, if he's going to lose his home, get his wages garnished? He wants to pay the loan back, but he can barely make ends meet now.

Answer:
He had enough money to buy a condo, but not enough to pay his debts and obligations to others? His debts and obligations to others comes FIRST, before he buys things for himself. If he couldn't afford to pay his bills, then he should have had enough responsibility to WAIT to have a child until such time as he could AFFORD it. If his finances are so tight that he can't afford an extra $140/month, then he probably over-reached his means when he bought the condo.

My heart bleeds. This person deserves whatever they do to him. The implication is that he is buying a condo -- but can't afford to pay back $140/month for an education that enabled him to buy a condo. What's wrong with this picture? This happened to a friend of mine. Essentially, the cost of defaulting will be added to the principal (it was 1/3 of the principal for my friend). Then they will try to work out a payment plan that he can handle. If they can't come up with a plan that he can manage, they will sue him, essentially to get in line ahead of his other creditors even if it forces him into backruptcy. Student loans are rarely dischargable under bankruptcy.

He should make every effort to work it out with them. With guaranteed student loans the note holder has no incentive to be reasonable, because principal and interest are guaranteed. The Guarantor may be more willing to bargain, but he's already facing a much bigger principal. Hopefully the home is held jointly with someone else (like the mother of his child) so they couldn't touch that. Maybe there is some other way to cut expenses. Has he tried: Selling his car and buying a cheaper, perhaps used, one; moonlighting; taking in borders; Garage Sale of all personal property? He should see if there is anyway to save his credit. If there is, he should get rid of the condo and payoff the loan. If not, might as well hang onto the condo, he won't have good credit for 5 years anyway, and try to work from there. This is scary stuff, my sympathy goes out to him.

The borrower should write to the Guarantor and explain the circumstances and offer to meet and develop a plan of repayment. Before the matter results in a judgment against him, someone will be very interested in a negotiated resolution because the vast majority of such loans get written off once they reach this point. If the response is not immediately forthcoming, he should be patient. Bull. Lower your standard of living until you can pay off your debts and provide food and shelter for yourself and your family. That means not buying the new stereo system, the TV, the VCR, the new car and all those other consumer goods after graduating. Most importantly, don't blame others for your problems.