Friend Of Mine is in MAJOR Student Loan Debt

[Singuy]

A friend of mine accumulated 200k @5% worth of private student loan debt from studying to be a physician in England, and ended up not able to get into any kind of residency program in the States. It has been 5 years since he graduated and still no luck. Working as a pharmacy technician, he is paying interest ONLY on the loans and can barely make ends meet.

I gave him the advice of defaulting on his loans and use the statues of limitation to his advantage...his next best thing would probably be filing bankruptcy(heard PRIVATE student loans can be whipped out via bankruptcy). He has a house(fully paid for by his parents) and a car with probably some payments. His wife is also in the middle of obtaining a green card(they both have a newborn in the states). He also has 15k worth of cc debt mostly due to the fact that he can't really make the ends meet.

Are there any horrendous consequences (besides a trashed credit) using any of the above techniques? His bank is now requesting for him to pay interest PLUS principle and that's just not going to work for him. Making 2k/month with a student loan of 200k is just impossible especially with the newborn.

[greenskeeper]

he'd still be liable for the student loans after bankruptcy

[Singuy]

he'd still be liable for the student loans after bankruptcy

You sure about this because this is Private loans, not federal loans.

[Petunia 100]

Here is some good info on this subject:

http://www.debt.org/students/bankruptcy/

[corn18]

You sure about this because this is Private loans, not federal loans.

"In 1976, Congress prohibited federally guaranteed student loans from being discharged in bankruptcy except under conditions of undue hardship. This was in response to largely unfounded fears of too many student debtors looking for an easy way out of their obligations.

This put student loan debt in the same category as financial obligations like child support, alimony and criminal fines.

In 2005, Congress added private student loans to the list of debts that cannot be discharged."

[disneysteve]

A friend of mine accumulated 200k @5% worth of private student loan debt from studying to be a physician in England, and ended up not able to get into any kind of residency program in the States.

I can't help but wonder about something. He studied to be a physician in England. He then attempted to continue his training in the US without success. So what happened at that point? Why didn't he just continue his medical training in England? Had he done so, he would now be a practicing physician rather than an underemployed pharmacy tech.

[Weird Tolkienish Figure]

A friend of mine accumulated 200k @5% worth of private student loan debt from studying to be a physician in England, and ended up not able to get into any kind of residency program in the States. It has been 5 years since he graduated and still no luck. Working as a pharmacy technician, he is paying interest ONLY on the loans and can barely make ends meet.

I gave him the advice of defaulting on his loans and use the statues of limitation to his advantage...his next best thing would probably be filing bankruptcy(heard PRIVATE student loans can be whipped out via bankruptcy). He has a house(fully paid for by his parents) and a car with probably some payments. His wife is also in the middle of obtaining a green card(they both have a newborn in the states). He also has 15k worth of cc debt mostly due to the fact that he can't really make the ends meet.

Are there any horrendous consequences (besides a trashed credit) using any of the above techniques? His bank is now requesting for him to pay interest PLUS principle and that's just not going to work for him. Making 2k/month with a student loan of 200k is just impossible especially with the newborn.

AFAIK, one of the few advantages of private student loan debt is that it is subject to statute of limitations. After they eliminated bankruptcy protection, it may be the only way out for some people, unfortunately. IANAL of course, but he'll have to make himself "judgement proof" which basically means either owning few assets or hiding what you do own (again IANAL and this isn't legal advice).

That's the idea, anyway. Talk to a good bankruptcy lawyer. Living your life just to pay interest on a loan with no movement on the principal is just not worth it IMO.

[bjl584]

A friend of mine accumulated 200k @5% worth of private student loan debt from studying to be a physician in England, and ended up not able to get into any kind of residency program in the States. It has been 5 years since he graduated and still no luck. Working as a pharmacy technician, he is paying interest ONLY on the loans and can barely make ends meet.

I gave him the advice of defaulting on his loans and use the statues of limitation to his advantage...his next best thing would probably be filing bankruptcy(heard PRIVATE student loans can be whipped out via bankruptcy). He has a house(fully paid for by his parents) and a car with probably some payments. His wife is also in the middle of obtaining a green card(they both have a newborn in the states). He also has 15k worth of cc debt mostly due to the fact that he can't really make the ends meet.

Are there any horrendous consequences (besides a trashed credit) using any of the above techniques? His bank is now requesting for him to pay interest PLUS principle and that's just not going to work for him. Making 2k/month with a student loan of 200k is just impossible especially with the newborn.

About the only way to get rid of them is to shift the debts to something else. For instance, open up a HELOC on his house and use it to pay off all the loans. Then default on the mortgage. File bankruptcy, give the house back to the bank, and start over. Or open up as many credit cards as he can and use them to pay off the student loans, then default on the CC payments, file bankruptcy, and start over.

I don't recommend either one of those strategies by the way. But that's about the only ways that I can think of to get rid of student loans without actually paying them off.

[Weird Tolkienish Figure]

About the only way to get rid of them is to shift the debts to something else. For instance, open up a HELOC on his house and use it to pay off all the loans. Then default on the mortgage. File bankruptcy, give the house back to the bank, and start over. Or open up as many credit cards as he can and use them to pay off the student loans, then default on the CC payments, file bankruptcy, and start over.

I don't recommend either one of those strategies by the way. But that's about the only ways that I can think of to get rid of student loans without actually paying them off.

Careful. Borrowing money with no intention of paying it back is considered fraud. People have gone to jail during bankruptcy over this.

Of course it's often hard to prove. One way to do this legally might be to use the fungibility of money, for example, put your entire paycheck towards student loans, and use CC's to pay for everyday expenses. That way they cannot tie the CC directly to the student loans.

Bottom line, consult a lawyer.

[Singuy]

I can't help but wonder about something. He studied to be a physician in England. He then attempted to continue his training in the US without success. So what happened at that point? Why didn't he just continue his medical training in England? Had he done so, he would now be a practicing physician rather than an underemployed pharmacy tech.

To answer this question: He went to an out of country school (kind of like going to the islands for medical school but went to England instead). He had no intention of staying in England to become a physician.

He made the decision to stop paying the student loans and let the statues of limitation takes its course while dodging phone calls for the next 5 years. Total insterest paid the past 6 years: 50k...so it's not like he didn't try.