General Question

tapestryofregret's avatar

How can I help my brother with his student loans?

Asked by tapestryofregret (446 points ) December 15th, 2010

Here is some background on my situation to better help understand the whole circumstance:

I’m a 26 y/o unemployed MRI engineer. Currently, I am living with my brother in his apartment, drawing unemployment benefits as I look for work…the outlook is quite grim though, as my line of work is highly specialized and it seems individual start up companies are taking over all the business. I worked for 6 years making roughly 70 grand a year. My credit score is somewhere in the in the 670s. The only outstanding debt I have is my car loan, which I pay as agreed and always have.

My brother’s background:
He’s 25 working full-time as a field engineer, earning about 50 grand a year. His credit score is basically non existent and/or as terrible as it gets as he has student loan debts somewhere in the neighborhood of 60 grand (original loan amount is 32 thousand) which he is unable to pay.

The problem:

It was explained to me the only way to “rehabilitate” his debt is by 1st making a one time payment of somewhere in the neighborhood of $3,500. Which is a ludicrous amount of money for either of us to have at any given time. We both struggle to get by and live paycheck to paycheck, acquiring no savings whatsoever. He insists to me that any attempt to negotiate a lower payment is batted down by the collectors stating that they took his statement as a refusal to pay. I trust my brother is telling the truth, he’s not a good liar and we have a very good relationship and trust each other with anything.

The Question:

Given what you know about my situation and his….do you think there’s anything I can do to help? And if not, any advice for my brother as to what to do? He stresses out about this a lot and in turn that causes me to stress out. He has been very good to me these past few months and I am very eager to help alleviate this worry from his life.

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10 Answers

Seelix's avatar

Unfortunately, it doesn’t seem to me that there’s much you can do to help if you don’t have money to share with him.
Your brother seems (understandably) upset by the situation – could it be that he’s exaggerating the collectors’ reaction? I don’t mean to suggest that he’s lying to you, just that his feeling of hopelessness may be making things seem worse than they are.
Do you have a family member that you could borrow money from to make that $3500 payment? If your parents are able/willing to help out, they could be a nice interest-free source to borrow that money from.

I wish you both the best!

tapestryofregret's avatar

Unfortunately our parents are even worse off than we are and that is not an option.

I was thinking that maybe I could use my credit to pay this one time payment, so that he can get back on track….then he would pay me back as well as the associated finance charges. I’m not really sure if the interest charges on the credit card will be less than the interest that is accumulating on his loan that is in collections presently…I guess I’m asking which of the two is the lesser evil?

I can only hope that he is exaggerating the situation, because the way it is presented indeed is a very hopeless situation.

Seelix's avatar

I don’t know much about financial stuff; maybe someone who does will come along and give you a suggestion. You might just have to do a little math and see what makes the most sense in the long run. Best of luck!

Tropical_Willie's avatar

@tapestryofregret
Unless things have changed the student loan interest is LOWER than a credit card by a lot. Like 10% for student loan and 39% for credit card, with good not great credit rating.
DON’T use card to pay.
Find things to sell ( extra car ) or items you can do without ( Cable or lattes….)

snowberry's avatar

I suggest you contact Dave Ramsey. He’s got an awesome program for people who are debt and want to get out. He also has a syndicated talk show, and perhaps you could get on to talk to him regarding your question. http://www.daveramsey.com/home/

Taciturnu's avatar

Can you skip the collector and go straight to the lender, or did the collector buy your debt? Either way, if you start making small payments, trust me- they won’t send it back until you have a lump sum.

Make sure they are following the FDCPA. Several years ago, I had some debt wiped out on that basis.

You can also contact a credit counselor.

tapestryofregret's avatar

Thanks for the info, should keep me busy for a while. I realize I’m going to need more specifics on the situation before I can get a real grip on it.

nicobanks's avatar

Your brother is making 50 grand/year and he struggles to live paycheck-to-paycheck and can’t afford a $3,500 payment on his debt!? I can’t understand that… I make about 30 a year and still manage to put small amounts into savings each month and live comfortably.

My advice to your brother is to perform an audit on his finances. (I mean a personal audit, conducted by himself – a professional is not necessary.) Clearly, his expenses are too high! He’ll simply have to find the fat and cut it out. Maybe he buys too many gourmet foods? Maybe he should move to a less expensive place? Maybe he should give up the cable account? Etc. He might also consider increasing his income – maybe through a part-time job, or by selling off some of his luxury items. (By “luxury items” I don’t just mean diamond rings, but anything not necessary to live by, including electronics, DVDs – this could help build that one-time $3,500 payment, at least.)

However he does it, your brother must start living on a budget. That’s where you can help him out. If he doesn’t have a handle on finances generally, and now he’s stressed out about it to boot, he will not be able to get this job done alone. You can’t help him by giving him money, so at least you can help him organize what he has.

Do not put that payment on your credit card! You will only be compounding the problem. Your brother doesn’t just need to get rid of his debt: he needs to learn how to live debt-free. With the kind of money he’s making, and considering he has no dependents, there’s no reason he can’t do this. He just needs to calm down and open his eyes.

bkcunningham's avatar

If he has already defaulted on the student loans and they are in collection, get everything (and I repeat everything) in writing from a collection agency. It will still be on his credit reports even if he pays it to the collection agent. It will just show it as a debt that went into collections and is paid.

It won’t be wiped off the reports unless the collection agency agrees to do this and you get it in writing and even then, you’ll probably have to dispute it on the credit report with all three agencies. So you need proof of it being paid and that the collection agency said it would be removed from the credit reports upon payment in full.

You need to find out the interest rate of the loans before you or he can make any determination about putting it on a credit card or taking out another loan to consolidate the student loans.Were they private loans or federal loans? What will eventually happen is that his pay will be garnished and any tax refunds he gets will be kept ot offset the loans. You can’t discharge a student loan through a bankruptcy in most cases.

The interest rates are generally very high on government student loans.

You brother may be responsible for paying upto 25 percent more than the principal and the interest to satisfy the costs incurred in contractors collecting the debt. I assume you aren’t the co-signer, but for future reference, never be a co-signer for someone taking out student loans unless you are willing to pay the loan yourself without question. It is a messy situation to get into.

snowberry's avatar

Many credit counseling outfits have a bad record, and in fact actually hurt the people they say they are helping. I don’t know how you sort out the good ones from the bad, unfortunately. The Better Business Bureau does not give you any feed back regarding how problems were resolved, but they are better than nothing. I like http://www.ripoffreport.com/ because you actually get to see what the complaint was, and how (or whether) it was resolved.

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