My Daughter Lives in the UK Now and Can’t Afford Her U.S. Private Student Loans

Question:

Dear Steve,

My daughter has about $100k in private student debt (and another $100k in federal). She did her undergrad in CA and her grad in NY. Federal debt is manageable because they adjust for her income.

She can no longer afford to pay her private loans and they are unwilling to work with her and she has no more deferments.

She has been living in London for the past year and has no plans to return to the US. Wells Fargo has found her place of work in the UK. The only asset she has is her bank account. Of course we’ve been told she cannot be helped in Ch 7.

I just read one of your articles. Did I understand correctly that if/when she returns to the US after the SOL, she can release her loans in bankruptcy?

Can (or do you think they will) her private lenders sue her in the UK or garnish her wages from her UK employer?

Denise

Answer:

Dear Denise,

Dealing with student loan debt is full of a terrible amount of misinformation. It’s still an evolving topic and most everyone gets it wrong. From student loan servicers to bankruptcy attorneys, the right information is not getting out.

I have not heard of an international suit being filed in the UK over U.S. based student loan debt. It is unlikely that would happen anytime soon since it would require a number of legal efforts. It’s just not that common, yet.

Relying on the statute of limitations is problematic and would require a legal opinion from a U.S. based attorney. The problem is the statute of limitations can be put on hold while she is out of the country.

The big advantage is a private student loan outside the statute of limitations would no longer be eligible for collection through any lawsuit.

But I think you’ve laid out the real situation, her private student loans are just not affordable. It doesn’t matter what all the legal maneuvering in the world can do if she simply does not have the income to make any agreeable payment.

However, it seems that more and more private student loans are being settled through either lump-sum payments or payment programs before or after being sued by the lender.

I think you should read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan to understand why defaulting on the unmanageable debt isn’t the end of the world and can lead to an eventual solution.

And before you ask, she will have no problems returning home for a visit. Defaulting on her debt will not stop her at the border.

By the way, it sounds like your daughter may be on some sort of income based program for her federal student loan debt. Just keep in mind, those programs can be a terrible trap. You should click here to learn why.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

New proposal to ban companies from using arbitration clauses as a free pass to avoid accountability

Ask The Expert: Which Is Better? Bank Or Credit Union?

Question: My boyfriend and I are talking about marriage. We’ve taken your advice and had several very honest conversations about money, since we know finances are a big cause of fights. We’ve settled a lot of things, but we have this weird sticking point: My boyfriend insists I get rid of my Bank of America account and sign up with his credit union.

My boyfriend really really hate “big banks,” although it’s not like any of these banks did anything to him — he’s been with his credit union forever. (His dad was in the Army, so he’s with PenFed.) I don’t mind opening another account, but I like that Bank of America has ATMs and branches everywhere. While this won’t break us up, it really is the biggest fight we’ve ever had. What do I do?

— Katey in Arizona

Howard Dvorkin CPA answers…

In my 20-plus years as a CPA and financial counselor, I’ve met with many couples whose relationships were stretched thin by money fights. I must admit, however, I’ve never seen a couple argue over Bank of America.

First, let me acknowledge you both make some excellent points…

• PenFed is an excellent credit union. In fact, it offers one of the nation’s best credit cards. Earlier this year, Debt.com called it “the credit card for people who hate credit cards,” since it imposes no fees whatsoever.
• Bank of America isn’t an evil empire. I know many people who are quite happy with big banks. Debt.com editor Michael Koretzky has his mortgage there, because it actually worked out to be the best deal at that moment.

With that said, your boyfriend needs to learn how to compromise. In matters of love and money, I’ve learned this from counseling more couples than I can even count: It’s not about complete agreement on the details, it’s about philosophical agreement on how to save and spend.

Your boyfriend is doing you a favor by encouraging you to join his excellent credit union. Just the other day, I was reading a new study called the Credit Union Satisfaction Index 2015. The biggest finding: 90 percent of credit union customers are satisfied with the overall service. That’s high for any industry, but it’s actually up one point from 2014.

Meanwhile, banks rated only a 782 out of 1,000, according to JD Power. That translates into just over 78 percent.

Still, pressuring you to leave Bank of America isn’t a sound decision financially or emotionally. If you’re in the 78 percent, and if you’re not paying fees to Bank of America to keep your account there, this episode is a good lesson in more than money. It reveals how your relationship will proceed on all kinds of issues where you two differ.

You’re offering a healthy compromise by moving some of your money into PenFed. If your boyfriend wants to convince you to move the rest, the best way to do that is to put your money where his mouth is: Prove over the course of a year just how much money you saved and made by making the switch. If that adds up, you sound like a smart enough women, Katy, to make an objective decision.

This article by Howard Dvorkin first appeared on www.debt.com and was distributed by the Personal Finance Syndication Network.

Ask The Expert: Student Loans Or Health Insurance?

Question: My mother is mad at me because I don’t have health insurance. Instead, I paid the Obamacare penalty last year and this year. In 2014, that was $95. This year, it was $285. 

My mom keeps asking me, What happens if you get sick?” But I’m 28 and I’ve never been seriously ill. The problem is, the insurance where I work is terrible — I’m a teacher at a private nonprofit school for underprivileged children. It’s like auto insurance: It only covers really serious problems after a ridiculously high deductible.

I keep telling my mom I need all my money to pay down my student loans. Coincidentally, that payment is almost what I’d have to pay for health insurance. What do you think, Mr. Dvorkin? If my mom is right, I don’t see what I can do except not eat.

— Julie in Kansas

Howard Dvorkin CPA answers…

You have options, Julie, and none of them require dieting.

First of all, listen to your mother: You can be healthy today and in a car accident tomorrow.

While my expertise is on the student loan side of your problem, I’m also a business owner with hundreds of employees throughout North America. I’ve hired an entire Human Resources department to help those employees get the best benefits.

You don’t say if your school is big or small, but I imagine there’s at least one HR person you can consult. I urge you to do so. Your HR department or director has surely heard stories like yours, and they may have solutions you don’t yet know about.

That’s certainly the case for your student loans.

One of my personal missions is to tell every college graduate about the seven solutions to solve your problems with student debt. Five of them are programs from the federal government, each designed to ease your monthly payments so you could lead a productive life.

For you, Julie, there may be something even better: student loan forgiveness.

Depending on how long you’ve taught, the type of loans you have, and what you earn, you might be able to have your loans wiped out. Why? Because the federal government wants to encourage certain professions such as nurses, teachers, and firefighters.

Just like with healthcare, the rules on student loan forgiveness can get complicated. So just as I suggested you consult your HR department for the best possible insurance, I’ll also suggest you consult a student loan expert. Debt.com has many of those just waiting for your call — which is free. So is their analysis of your student loans and the programs you qualify for. Call them today at 1-888-472-0365.

 

This article by Howard Dvorkin first appeared on http://www.debt.com/ and was distributed by the Personal Finance Syndication Network.

Dvorkin On Debt: Is Your Retirement Automatically In Trouble?

Sometimes a poll can reveal an amazing trend you’ve never contemplated before. Other times, it simply confirms a long-held belief.

A recent retirement survey falls squarely into the latter for me.

New York Life polled nearly 1,000 “pre-retirees,” which it defines as workers between the ages of 50 and 62. Many had some sort of “automated vehicle” to save for their upcoming retirement.  Typically, that was a 401(k). So what did pollsters announce as the major finding?

Nearly half of pre-retirement Americans find it difficult to save anything beyond what they’re automatically putting away.

I’ve spent the past two decades counseling Americans to save — in person as clients, on network TV, and in newspapers like The Wall Street Journal. Like my peers, I’ve encouraged automatic deductions for everything from retirement to college savings. However, I long ago realized the downside to this major upside. Namely, once most people start saving this way, they’ll convince themselves that’s all they need to do.

I call it Set it, forget it, and regret it.

Most employees who take advantage of a 401(k) contribute around 6 percent, while most experts say you need to save and invest  around 10 percent of your income to retire comfortably. Automatic deductions are a great way to force you to save, because you don’t miss the money you don’t see in your paycheck. It’s not enough, however.

Even worse, I’ve often seen otherwise intelligent adults setting aside 4-6 percent in a 401(k) while charging thousands on their credit cards — and carrying huge balances month to month. Whatever they’re earning in that 401(k) is being wiped out — and then some — by massive interest fees.

In a way, both the 401(k) and the credit card balances are out-of-sight, out-of-mind. You don’t notice the 401(k) savings, but you don’t notice the credit card balances until the issuers cut you off. You simply keep charging and making minimum payments until it’s too late.

Don’t let Set it, forget it, and regret it get to you. Debt.com is here to turn regret into success. You can call one of our certified credit counselors for a free debt analysis. Please don’t forget to do it!

 

This article by Howard Dvorkin first appeared on http://www.debt.com and was distributed by the Personal Finance Syndication Network.

Dvorkin On Debt: Do You Have “Deficit Attention Disorder”?

Attention Deficit Disorder is a common enough affliction that most of us know the initials ADD. However, just this past week, I’ve discovered a new, financially based version of the same thing: “Deficit Attention Disorder.”

DAD results in otherwise responsible adults running up big deficits because they can only think about money in the here and now. They have no ability to make financial decisions that will help them immensely later on. Here’s one recent example.

Our No.1  “daily thought”

If I were to ask you what most Americans think about every day, what would you guess? Sex? Food? Politics?

No, it’s money.

GoBankingRates cleverly asked about our top “daily thought,” and money came in at 18 percent. Work was second at 17 percent. “Love life” was only third, at 11 percent.

As a follow-up question, GoBankingRates asked about our “biggest financial fears.” Topping the list at 20 percent was “not being able to afford a home.” Sadly, “never being able to retire” was second at 16 percent, followed closely by “losing my job” at 15 percent.

If you notice, retirement is the most far-from-now category, so it’s not too surprising it didn’t rank higher. Still, it’s also the most serious fear with the most catastrophic ramifications — because you can always rent if you can’t buy a house, and you can always get a job (even if it’s lower paying), but if you retire broke, there’s no option that late in the game.

Tired of retirement talk

Sometimes, when a problem seems intractable, we simply give up trying to solve it. I’m fearful that retirement has become just such a problem for most Americans.

Earlier this month, insurance firm Aon Hewitt released a thoroughly depressing study. The company analyzed 77 large U.S. employers with a combined 2.1 million employees — and found “only one-in-five are on track to meet or exceed their needs in retirement at age 65.”

Worse still, three in five workers will need to keep working past 65 just to survive. Even with this bleak news, “many workers are not planning enough for their long-term financial goals,” researchers conclude.

Of course, it’s hard to plan when you’re swamped with credit card debt,  which many Americans are. The average U.S. household owes more than $15,000 on their credit cards. If those households had that $15,000 to invest for retirement over the next 20-30 years, they could easily turn that into a solid nest egg.

If you want to learn more about retirement, here’s a video I made for a curious Debt.com reader. If you’re drowning in debt and can’t even begin to think about retirement, call a certified credit counselor for a free debt analysis at 1-800-810-0989. Do it now. Don’t let Deficit Attention Disorder become an even worse condition: Debt Death.

Howard Dvorkin is a CPA and chairman of Debt.com, an educational resource for those who want to conquer all forms of debt in their lives.

 

This article by Howard Dvorkin first appeared on http://www.debt.com/ and was distributed by the Personal Finance Syndication Network.

Father Forged Kids Names on Student Loans. Do They Owe Them?

Question:

Dear Steve,

My ex husband left 2 of my children with over $100,000 each with student loan debt. He signed loans with their names without their knowledge, he missed months of payments which incurred high interest rates and now these kids both under 30 are saddled with these debts.

They are beyond upset and see no end to paying off this debt. Neither myself or my children were ever made aware of this situation until recently when the debt collectors started calling.

I would like to know if there are any new laws to help in these situations and/or what if anything can be done to alleviate this burden for them

Paula

Answer:

Dear Paula,

As you can imagine, this is a complex problem. On one hand you have the issue that the kids were clearly victims of identity theft. On the other hand it appears they received the benefit from the loans.

So here is how I see the problem, and I’m assuming these are federal student loans since they constitute the largest group of loans.

The first and most immediate step would be for the kids to file a police report with your local authorities about the alleged identity theft. This is critical. The kids will need the police report number to move forward. The children may be asked and must be willing to participate in legal charges against their father and pursue a conviction that might include jail time. If they are not, stop here and start working out a payment arrangement.

Next, the kids should report the fraud and the police report number to the U.S. Department of Education, Office of Inspector General. Click here. There is an online form to file the complaint.

The biggest hurdle I see is if the Department of Education can convinced and satisfied it was fraud and they then relieve the kids from the liability of the loans, the loans will probably be clawed back from the schools. In that case the schools will probably go after the kids to repay the education they received. The agreement to attend is between the kids and the school.

If this was a situation of identity theft where the kids didn’t get the benefit, then it would be an easier matter to deal with.

If these were private loans the process would be similar but the ability to convince the private lender of the fraud without a successful conviction will be very tough.

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If you have a credit or debt question you’d like to ask, just click here and ask away.

If you’d like to stay posted on all the latest get out of debt news and scam alerts, subscribe to my free newsletter.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.