Student Loans and lawsuits

[daddywarbucks]

My wife had a student loan with a balance of $5,000 that was sold from her original bank to Wells Fargo. She is not working and we cannot pay the monthly payments. She has a low credit score already and the only asset they could put a lien against would be our car (not high value).

Wells Fargo said they would settle for $2500 but we didnt have that money.

So the question is will they sue over $5,000 or will they just sell to another creditor? Any way to tell the track record of a bank in how they deal with issues?

Am I correct in assuming if they are willing to settle now they may be willing to settle later when we have the money?

[lrprn]

So the question is will they sue over $5,000 or will they just sell to another creditor?

Normally student loan lenders deal with arrears with wage garnishment. However they can't garnish if she's not working. Wells Fargo may choose to write off the loan or sell it again - who knows? One thing I can say for sure....the loan isn't going away, ever.

Did your wife ever pay on the loan? Are any of your assets (home, car, etc) in her name?

Am I correct in assuming if they are willing to settle now they may be willing to settle later when we have the money?

Probably, but there's no way to know for sure.

Here's a link to some excellent information about what your wife's options are when she can't pay her student loan - http://www.nolo.com/article.cfm/pg/1...3/208/135/ART/

Doing nothing is very likely not the best thing to do in the long run. Allowing the late fees and penalties along with the continuing interest will spiral what she owes up exponentially over time. Best to use one of the Nolo suggested strategies to at least stop the late fees and penalties while the loan is still somewhat manageable once you get back on your feet.

[treehugger1]

Here is an idea to check out. Many folks know about consolidation but this is of little help if you have nothing to consolidate or you have already consolidated (sh*t out of luck.) But there is a program available called student loan "rehabilitation." Do your own due diligence by googling "rehabilitating student loans." This might offer some alternative strategies.

[treehugger1]

I should add that I recently read that the maximum wage garnishment for student loans is 15% of disposable wages. In terms of garnishing tax refunds to go against student loans, this is now a relatively simple procedure for the guarantor.