Student loans, credit debt, medical change...

CaliScott · #1 (**permalink**) 03-08-2010, 01:09 AM

I have been having trouble repaying my government student loan due to family medical problems.

My wife has now ended up as "Perm Disabled" after about 7 years of going through the medical paces which has accumulated bad debts. I had then recently lost my job and was not able to make any additional progress on student loans. I am now working but the loan ended up defaulting.

The only out that I see right now is sinfully borrowing against my 401(k) to pay down the principle to get the monthly payments manageable and I have a credit card that will do a settlement amount that is less than the total amount owed. Thought is that if I clear the CC from my assortment of bills, I can use that money to pay back the 401(K) loan while getting back up on my feet and paying the student loan.

Family has no money to help out. Wife's disability payments will not kick in for a little less than a year after the gov gets to it.

Am I missing any other options?

Thanks in advance for any feedback!

sapphirecapital · #2 (**permalink**) 03-08-2010, 05:19 AM

what about your tax refund? if your wife has been certified disabled by the SS and has been struggling for a long time why is it not backward and you get the backamount in one lot? may be you need to fight the admin to date the disability back.
CC use as you described is dangerous

CaliScott · #3 (**permalink**) 03-08-2010, 09:29 AM

Thanks for the reply and sorry if I was not clear in the original post - she just got to the point where she has been considered disabled by doctors, not SS.

We would expect that the SS payment would go historical, thus from the tax perspective she has not qualified for the tax benefit.

Wade Stoddard · #4 (**permalink**) 03-10-2010, 03:23 PM

Have you assessed your current spending habbits? Have you cancelled all of your accessory items: cable, internet, phone, cell phones? Do you have a late model car? Can you sell it and buy a smaller and less expensive model. Really you need to get your hands dirty before you think about touching your 401k.

Think about downsizing and moving into an apartment. If your financial situation is that dire you will need to take serious moves to help yourself.

I am not a financial advisor but I think this is a good step for you.

Wade Stoddard

Wade Stoddard · #5 (**permalink**) 03-10-2010, 03:26 PM

Also, after re-reading your post it seems like you can request deferment from your loan due to financial hardship. Usually, agencies will work with you on a few months. You may also try going back to school. Go to a local community school and enroll in a few courses. It seems odd, but if you can claim you are back in school you can defer the payments - this is a last resort option.

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