Dear Steve,
I have a Sallie Mae Private Student loan (three actually). The last time I made a payment was 1/29/2010 - it was one of those $150.00 forbearance things. I haven't been sued, and they haven't been actively trying to collect for at least the last year. The total value of the loan is about 38k as of right now. I opened the loan in Texas, and Sallie is located in Pennsylvania.
My Questions:
1) which Statute of Limitations applies to Sallie Mae Student Loans. I no longer have the original contract, and Sallie Mae does not provide me access to my contract via their website. So is it, Texas (where it was opened), PA (where Sallie is located), Tennessee (where I made the last payment) or Alabama where I live now. I believe Texas is the correct answer here, but have never found a good response to that question.
2) I received a healthy Christmas bonus, and want to try and Settle with Sallie to make it "go away" - a mortgage lender told me the other day the only thing standing between my family and a house is these loans. How do I go about settling with them, for as little as possible? If I am understanding SOL correctly, at this point Sallie has no legal way to enforce collection, so if I pay them a dollar to settle, then it's a dollar more than they are getting any other way.
3) What's a good low-ball offer to start with? I want to make something reasonable to make it an easier process.
Adam
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Dear Adam,
You ask some very good questions and one which a lot of people miss. Most people still regurgitate the incorrect advice that private student loans are not dischargeable in bankruptcy. However after the statute of limitations has expired they are completely dischargeable.
Your question about which state would prevail is one that would really require you to meet with an attorney who is licensed in your state. There are some really quirky nuances to statute of limitations and a broad guess might just be wrong. If you can't find a local consumer attorney try the National Association of Consumer Advocates or click here.
Sallie Mae loans are tricky because Sallie Mae is both a federal and private loan servicer. The first step would be to figure out exactly what type of loans you have. To do that, read this guide.
I have seen Sallie Mae settle student loans and typically they are in the 50%-70% range. Most of these settlements were proactive offers sent by Sallie Mae so be sure to open every item of mail that comes from Sallie Mae.
Keep in mind that when dealing with a large entity like Sallie Mae, logic is not the default position. Large groups like this are driven by processes and procedures and not always smart financial sense. It's quite possible that you may offer to settle and they won't accept it because your account is not flagged for settlement by their internal process.
Nobody is entitled to settle. Settlement is a process where two parties come to a meeting of the minds that they have the resources to settle and want to settle. Sallie Mae does not have to settle and may not want to settle.
Based on what you shared the logical approach would be to meet with an attorney who is licensed in your state to figure out how close you are to the SOL and maybe just wait for that to pass and then think about discharging the debt in a bankruptcy.
If these are truly private student loans and it turns out Texas is the prevailing state then it is my understanding that your wages can't be garnished in Texas even if you are sued. It's not a great solution but being aware of what the reality is rather than worry about assumptions is a good thing.
If these turn out to be federal eligible loans that Sallie Mae is simply servicing then you have some good income based repayment options to consider. Click here for more on those. Sallie Mae isn't always the best communicator about those options.
If you do decide to make Sallie Mae a settle offer then have 50% of the balance on hand to snatch up the offer. If they do accept the offer then make absolutely sure you get the offer in writing before paying. And don't forget that any debt forgiven will be reported to the IRS on a 1099-C and if you are not insolvent you will have to probably pay income tax on the forgiven debt. That can be an added expense.
If you contact Sallie Mae and it turns the active collections back on then be sure to watch for debt collection violations and these can be used to help negotiate your position. You should really talk to an attorney about what to watch for and track. Maybe I'll get to that in another reader question so stay tuned.
Just be very aware of the student loan assistance scammers that are out there waiting to prey upon you. Read this guide to know what to watch for so you can stay safe.
Before I go I wanted to leave you with three easy action items you jump on right now to address your situation. Just click here.
Steve
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