Student Loans/Negotiating for lower payments
My wife has a school loan from about 12 years ago through Great Lakes Higher Education Corp. There are actually 4 loans varying from 2.4 to 3.2% interest with a total due of $15,000. Due to health problems and being unemployed in the past, she has had several times where she needed to defer payments. For the past 4 years, she had a reasonable payment of about $55.00 due to her income, but now that we are married, they asked for our income tax return and based a new payment off our combined income. She has been unemployed for a little over two months (currently looking) and her payment is about to triple since it goes off combined incomes. We're looking into filing separately this year to see if that helps, but we live in a community property state and I don't think she can defer anymore (Great Lakes is not willing to work with her). If she misses a payment, our tax returns can be garnished until it is paid in full. Do you see any other options available to her? She only makes about $12,000/year which covers groceries, gas and her school loan. If her payment increases with her not working, I'd have a hard time paying the $174.00 they want us to pay in addition to her other expenses I'm paying for now. Any advice would be greatly appreciated.
Based on the details of your question, I'm going to assume these are federal loans. Assuming that's true first let me defend Great Lakes a little bit - they are heavily bound by the extensive regulations that surround federal student loans. So if they tell her she cannot get anymore unemployment deferment time, it's because she's used the max (36 months# allowed by federal law. That goes for using your income for income based repayment purposes as well if you file jointly. The idea behind that regulation is that they want to take into account the common situation where both spouses carry federal student loan debt - so in that case they take both incomes into account - but also both student loan payments. In your case it works to a disadvantage as I assume by your question that you do not have federal student loan debt of your own. The solution would be to file separately as you mentioned, however that has it's own consequences as you seem to be aware of. Here's some additional ideas - as you say the interest rates vary have you considered consolidating the loans into a Direct Loan consolidation? This would extend the term to about 15 years based on her balance and give you a payment of around $105 per month per my rough calculations. If she has Federal Family Education Loan Program Loans rather than Direct loans, she could also apply for something called income sensitive repayment #i know - why do they give these plans such similar names??) where she could pick a percentage of her income to be her payment amount on an annual basis - generally at least interest only. There's some other options as well but these would be the most beneficial to you in the long run so rather than further complicate matters - I'm going to leave it here and let you contact me again if you don't thing these would work. PS: Make sure she's actually used all her unemployment deferment time and not just forbearance - a lot of borrowers get confused by the two.