Default and Garnishment – Recently I sat down with a Middle School Teacher who had defaulted on her Student Loans. Her wages were being garnished and her Income Tax Refund of $5,000 was recently seized by DOE. She was overwhelmed with teaching and had come to accept this state of affairs.

As I do in these situations, I determined who her defaulted servicer was and we called that servicer together. In her current situation she was not eligible of Income Based Repayments or Loan forgiveness. I was able to provide advice to her on whether to apply for Consolidation or Rehabilitation. She chose consolidation for solid reasons. My job is to explain the trade-offs of each choice and then let her make a fully informed decision.

There is a non-monetary benefit from the work that I do. That benefit is being present when my Middle School Teachers finally smiles and realizes that this nightmare is under control. I cannot put a price on how good this makes me feel to help someone whose main goal in life is to educate our children.

Payment Plan –  I recently gave a seminar at a local hospital on Student Loan Forgiveness. After the meeting, I met with one of the staff. She shared with me that she had paid over $8,000 to a vendor to cure her defaulted student loans. After I said that was an excessive fee she said she was at peace with that and wanted help to make sure that she was in the proper program. So we sat down and went over her loans. I helped her in two ways. First she was with the wrong servicer and we prepared the paperwork to have that changed and second, her payments were $600 more per year higher than it should be. She was in a plan at 15% of disposable income and I placed her in a better plan at 10% of disposable income. Nothing fancy just attention to detail to her situation. For a $75 fee, she tells me that it was well worth the cost.

Not Listening – Last year I met with an IT professional who worked for a Church. I met with him and showed him how to lower his payments and qualify for Public Sector Loan Forgiveness. It may surprise you but he did not follow any of my advice.

So last month we met again to go over his situation. He had not made any payments over the past year and turns out was days away from default. So we fixed that with a call to his servicer. He is no longer delinquent. He was still obligated to pay based on Standard Repayment at $534 per month. Again I showed him based on his income, filing status and dependents that he could lower his payments to $27 per month. I also advised him to move from a 1099 employee to a W-2 employee at the Church.

I realized that many of my clients are in denial and just do not want to deal with their Student Loans. So it is often ignored. Car payments, rent payments or mortgage payments are viewed differently because the lender can repossess the car or evict you from your apartment or foreclose on your home. With student loans they just can’t repossess your Education. So there is not the same urgency to deal with Student Loan payments plus the servicers are dealing with double digit delinquencies and it really is not economically attractive to devote resources to collect late payments.

To sum it all up, I realize that sometimes daily life can overwhelm sound financial decision-making. My borrower in this situation is extremely bright and capable. Yet I realize that I need to be mindful of human behavior and understand that gentle coaching as well as timely reminders is important.