Private student loans charged off
Sallie Mae Smart Option Student Loan SM
The innovative Smart Option Student Loan helps student save money, build good credit, and pay off their student loan debt faster.
Designed to help shorten the amount of time it takes to pay off the loan, the Smart Option Student Loan requires interest-only payments while in school and during the six-month separation period to avoid capitalized interest.
Students save money on interest, significantly reducing the total loan costs. With this school-certified loan, student can borrow up to the full cost of their education, less other aid received l
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Note: We don't encourage you to use private student loans as your only source of financial aid. You should first get all of your eligible federal student loans, scholarships, grants and other federal and college aid before applying for private student loans. Use private student loans to help make up the difference from the total cost of education and the federal aid received.
We recommend that you first build out a budget plan to list all of your aid sources. Then budget your college start-up costs and monthly expenses. Apply for private student loans only when you need extra funds. There are no application deadlines with private student loans. You can apply at anytime when you need extra cash.
We invite you to visit our SayStudent.com aid center for information about federal student loans, scholarships, grants, college aid, and other financial aid information.
1 $25/month fixed payment repayment option is available for new loan applications initiated on or after June 28, 2010, and is subject to change. The savings example uses approximated numbers, is for informational purposes only and is an example of loan terms available through the Smart Option Student Loan. Savings is based on the following assumptions: A Smart Option Student Loan made to a freshman borrower at a degree granting institution of $10,000 with two disbursements and a 10.05% APR [Interest rate of LIBOR + 10.375% (LIBOR of 0. 375% as of 6/25/2010) and no origination fee or disbursement fee]. APR may increase after consummation. Repayment consists of 51 fixed $25/month payments (in-school period of 45 months plus separation period of 6 months), followed by 119 principal and interest payments of $179.79 per month and one payment of $115.65 for total payments of $22,786 (finance charge of $12,786). Compare against a traditional 15-year private student loan for $10,000 where payments are deferred during school and grace periods, an estimated APR of 9.97% and repayment consisting of 179 principal and interest payments of $162.11 per month and one payment of $41.83 (following a 45-month in-school period and 6-month grace period, after which accrued interest is capitalized) for total payments of $29,060 (finance charge of $19,060).
2 Borrow up to the cost of attendance (minimum $1,000) as certified by your school and confirmed by Sallie Mae, less other financial aid received. Sallie Mae reserves the right to approve a lower loan amount than what the school has certified.
3 Market leading rates based on a May 7, 2010 review of competitor rates and APRs. Rates and fees shown are available for borrowers attending degree-granting institutions with the fixed repayment option only. The rates for borrowers attending non- degree granting institutions with the fixed pay repayment option will range from L + 8.50% to L + 12.50% (8.82% APR to 13.88% APR) (LIBOR of 0.375% as of 5/25/2010) and the origination or disbursement fees will range from 0% to 5%. The APR and interest rate on your loan will be a variable rate and will change based on changes in the one-month LIBOR rate. Your interest rate and monthly payment will increase if the one-month LIBOR rate increases.
4 Benefit for enrolling in monthly recurring automatic debit payments is available for as long as monthly payment is successfully deducted from the designated bank account. Benefit is suspended during periods of forbearance and certain deferments.
5 The 2% reward benefit is available on the Smart Option Student Loan during the borrower's initial in-school and separation period only. If the borrower leaves school but returns later, the reward will not be available for any subsequent in-school period. The primary borrower must be of the age of majority in his or her state of residence (typically 18 years old) and must enroll in Upromise at the time he or she applies for the loan or already be a Upromise member at the time of loan application. If the primary borrower is already a Upromise member at the time of loan application, the borrower must indicate that when applying for the loan and provide the requested information to confirm enrollment. To be eligible to receive the 2% reward, the borrower may not have had two consecutive scheduled payments past due on the loan for which the benefit is available. If the borrower has two consecutive scheduled payments past due, he or she will no longer be eligible for the reward on that loan. If all conditions are met, the primary borrower will earn 2% of the scheduled payment in Upromise rewards into his or her Upromise account for each payment made by the scheduled due date. The 2% reward will be based only on the scheduled payment amount due and cannot be earned on payments that exceed the scheduled payment amount. The 2% reward benefit is subject to the terms and conditions of the Upromise service (as may be amended from time-to-time), including without limitation, restrictions on conversion, transfer and redemption of rewards, reward denomination, including whether and under what circumstances the rewards have independent cash value, and terms relating to fees and/or the forfeiture of rewards. Benefit available on eligible loans first disbursed on or after June 1, 2010.
6 To qualify for cosigner release, borrower must have successfully completed school, made 12 consecutive on-time principal and interest payments, meet age of majority requirements, be a U.S. citizen or permanent resident and meet the underwriting requirements when the release request is processed. Account must remain current until the request for cosigner release is processed.
You must attend an eligible school and be enrolled in an eligible program. U.S. citizens enrolled in eligible study abroad programs or studying at medical schools outside the United States are also eligible. International students are eligible with a creditworthy cosigner (who must be a U.S. citizen or permanent resident) and appropriate U.S. Citizenship and Immigration Service documentation.
You must meet current credit and other eligibility criteria
Terms and conditions apply to the Upromise service. Participating company, contribution levels and terms and conditions are subject to change at any time without notice. Go to upromise.com to learn more.
Sallie Mae Smart Option Student Loans are made by Sallie Mae Bank®. The Student Loan Network is compensated for the referral of Smart Option Student Loan customers.
What Happens if My Student Loan Is Charged Off?
Loans issued by the federal government generally have different policies from those issued by private lenders. This is because the government regulates the loans, while private lenders have the freedom to use their own procedures. The Department of Education does not sell student loans to other agencies, but it uses a collection department to collect payment on charged-off loans. Therefore, you will always be dealing with the Department of Education when you are trying to repay that student loan.
Private lenders often sell their loans to other lenders when they are not profitable. In many cases, they will sell them to a collection agency as soon as your loan enters default, which is when you have not paid for 180 to 270 days, depending on the lender. The loan will be charged off on the original lender's books, meaning that the lender has taken the financial loss. However, the debt is still payable to the new lender or collection agency, who will contact you to get payment.
Student loans generally cannot be discharged in bankruptcy, so lenders and collection agencies rarely give up on collecting payments. You will probably get frequent calls from the lender trying to arrange a payment schedule. The lender might start garnishing your wages, which means that your employer sends part of each of your paychecks to the lender to repay your loan. The lender can also intercept your tax refunds and garnish part of your Social Security income. You could be sued for the entire amount you owe. If you want to go back to school, you will not be able to borrow additional student loans while you are in default.
Your student loans appear on your credit report, so each missed payment is reported to all of the credit bureaus and lowers your credit score. When the loan is charged off, its status will change on your credit report and will significantly lower your score. If it is sold to a collection agency, the account will appear in the collections section of your credit report. Regardless of whether or not you pay it, the collections account will damage your credit score for up to seven years.
My Private Student Loan Was Charged Off. Should I Just Ignore It?
I defaulted on my Navient/Sallie Mae private student loan and I just found out that they have closed the account and charged it off as bad debt as listed on my credit report.
My private student loan was closed and charged off. I’m assuming they have turned it over to a collection agency, but I haven’t heard anything yet. If they did turn it over to a collection agency, what are the chances that I would be sued and my wages garnished? What can I do/what should I do if/when I’m contacted by the debt collector? I can’t afford to pay the loan or I would have continued making payments. I rode it out with Navient until they closed/charged it off so, should I ride it out with the debt collector until the statute of limitations is up?
What you decide to do has to be a decision you make after weighing your options.
Keep in mind that just because a debt is “charged off” does not mean it’s not collectible. You should watch your mailbox for a 1099 form if the debt is reported as a bad debt. If the amount is for more than $600 you may owe personal income tax on the forgiven amount above the point you are insolvent. Talk to your tax professional about this.
Also keep in mind the Statute of Limitations (SOL) does not prevent you from being sued or a collector going after you to get you to admit to the debt or make a payment on it. If you are sued on a debt outside the SOL you would have to raise that fact as a defense to the suit.
The only way to absolutely know if a debt is outside the SOL would be to get a legal opinion from an attorney who is licensed in your state. Many factors can cause a debt to be extended past a flat time. Every situation is different.
All of that being said, waiting to see if you are sued is a strategy. You could then deal with it at that time, including settling the debt for less than you owe.
At this point you might want to enroll in a three bureau credit report monitoring service to be notified if the debt reappears on your credit report. It’s not unheard of for a collector to report the old debt with a new date to get it to pop back on your credit report.
As far as the odds of you being sued, nobody can ever know that. Creditors and debt buyers have changing strategies of when to pursue a debt. If you wanted an absolute percentage all I can offer is 50-50. Either you will or won’t be. But frankly I would not spend time worrying about it. If you are sued you should talk to a knowledgeable student loan attorney. Here is my list of smart student loan attorneys.
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The MeasureOne Private Student Loan Report
The semiannual MeasureOne Private Student Loan Report provides data and analytics on private student lending, including repayment and delinquency trends, as well as loan performance activity among borrowers and lenders. Research in this report reflects data as of Q3 2016 for private student loans and does not include federal student loan data. This installment of the report focuses exclusively on school-certified loans and does not include consolidation loans, which are typically made to borrowers who no longer attend school and who seek to combine education loans into a single education debt obligation.
Key Research Findings as of Q3 2016
- The early-stage delinquency rate (30 to 89 days past due) declined by 8.8 percent year over year and stands at 2.7 percent of total loans in repayment. Compared to five years ago, the early-stage delinquency rate has declined by 43.6 percent.
- Both undergraduate and graduate early-stage delinquencies are at the lowest levels since peaking. For undergraduate loans, Q3 2016 had the lowest rate at 2.8 percent since the peak of 8.7 percent in Q4 2008, a decline of 67.1 percent; for graduate loans, the 1.9 percent rate is lower than the Q4 2009 peak of 4.0 percent, a decline of 52.9 percent.
- The late-stage delinquency rate (90 days or more past due) declined by 14.9 percent year over year and stands at 1.9 percent of total loans in repayment. Compared to five years ago, the late-stage delinquency rate has declined by 51.4 percent.
- As with early-stage delinquencies, both undergraduate and graduate late-stage delinquencies are at the lowest levels since peaking. Third-quarter 2016 had the lowest late-stage delinquencies rate at 2.1 percent for undergraduate loans, 71.4 percent lower than the Q2 2009 peak of 7.3 percent. Similarly at 1.2 percent for graduate loans, late-stage delinquencies are 56.0 percent lower than the Q1 2010 peak of 2.7 percent.
- Annualized charge-offs declined by 20.8 percent year over year and stand at 1.9 percent of loans in repayment, the lowest Q3 charge-off rate since before the financial crisis. By comparison, the charge-off rate five years ago was 4.8 percent, representing a decline of 61.0 percent from Q3 2011 to Q3 2016.
- Year over year, the percent of loans in forbearance status declined 1.5 percent with a current rate of 2.2 percent; loans in deferment declined 3.2 percent with a current rate of 18.2 percent; and loans in repayment increased 0.4 percent with a current rate of 74.5 percent; the percent of loans in grace status increased 7.1 percent and stands at 5.0 percent.
- The overall private student loan balance increased by 0.8 percent with undergraduate loans continuing to make up a greater percentage of the overall balance at 86.2 percent compared to graduate loans at 13.8 percent. Of the total, the undergraduate loan balance increased 0.6 percent year over year, and the graduate loan balance decreased 3.8 percent.
- Private student loan originations in academic year 2016-2017 increased 5.47 percent compared with academic year 2015-2016. Of this total, undergraduate loans account for 88.7 percent and graduate loans account for 11.3 percent.
- Just over 93.2 percent of undergraduate private student loans included a cosigner in academic year 2016-2017, a rate that has steadily increased since academic year 2008-2009 when it stood at 75.8 percent. Conversely, the proportion of cosigned graduate loans has decreased for three consecutive academic years from AY2012/2013 to AY2014/15 and stands at just over 59.3 percent.