A reader's religious awakening raises financial questions.
Question: I had two Citi student loans, and at some point in time within the last 5 years, they went to Navient (Sallie Mae). I recently called to ask if I could get a lower pay-off amount, as the original loans were 32K and now are up to about 64K because of deferment and interest. They said no, and I believe these may have been private loans.
My conditions have changed. I was born into Islam however never knew much about my religion. Since 2012, I have been learning more about my faith, and it is strictly forbidden in my faith to have dealings with interest.
I am offering to pay off the original amount I owe, however, due to religious reasons would like them to recognize that my awareness and conditions have changed from the time of originally accepting the loan with Citi Student Loan Corp and not even with them at Sallie Mae.
Can I get the interest wiped out and close this account and case with just paying the original amount borrowed?
I am in the Seattle, WA area. Are there attorneys that you can direct me to that can help?
— Amir Casey
Steve Rhode answers…
Yes, I am very familiar with the issues surrounding the Islamic approach to interest. You might enjoy reading Debt & Religion: A Look at the Islamic View of Debt With Imam Asal.
Asking any lender to adjust their terms and conditions after the fact for religious reasons is just not going to happen.
You’ve also learned a painful lesson, the damage caused by deferment is enormous. Most people think it is an innocent time not to make payments and get a payment vacation. In fact it just puts the debt in turbo and the interest causes the balances to explode.
I have observed Sallie Mae, now Navient, settling more loans, but you’ll need expert assistance to get yourself in the right spot to settle them. If you just call up and ask, they will generally say they don’t settle. However, people are receiving offers in writing from Navient without asking when they are significantly delinquent.
The next issue is if you will have the money on hand to settle. You’ll need to either pay off the settlement in one payment, or three or four.
If you don’t have funds available to do that, then you might want to talk to your mosque about Zakat. It’s “a muslim charitable fund that followers may ask for help from in order to repay problem debt. Zakat is a obligatory charity for Muslim followers.”
But even considering all those facts above, if your faith is guiding your repayment then you’ll have to seek wise counsel on how to deal with what the imam told me. He said even those that borrowed with interest, are obligated to repay their entire debt. And if they don’t, they will be prohibited from entering paradise when they die.
How you overcome that little issue is above my pay grade.
Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.