Get Out of Debt Guy

My Student Loans are a Nightmare

Posted May 14, 2013

WRAL Reader Question

Dear Steve,

My student loans are a nightmare.

I have a total of close to 70K in students loans. The majority of which are with Sallie Mae. I have 1 loan with Citibank at $11,000 and one with Great Lakes at $6,000. The rest with Sallie Mae. My payments for the 2 loans I mentioned are $100 each, which is fine.

My one loan grouping with Salle Mae ( $23,000) is in a graduated repayment plan so I pay them $100/mo also. The other loan grouping with Sallie Mae ( $28,000) is in a forbearance now because I could not afford that payment of $300/mo ( that is what the payment is with a graduated repayment plan).

So this coming Sept, that $28,000 loan will go into repayment and I am major losing sleep over this and we cannot even plan for a family because of this nightmare.

We are already tight as it is and I have been looking for a job in my career field since I graduated in 2009. I feel like I am drowning. The other thing I can think of doing at this point is put ting all 3 loans that I have been handling well, into forbearance while I start making $300 +/mo payments on that $28,000 loan.

That is the only way I can not have them breathing down my neck. I am getting nowhere with this because I am actually not paying anything down, just basically paying the interest

Any suggestions on how to go about being able to handle these? I can afford a $300/mo payment for my student loans. Maybe $350 but that may be pushing it. I just feel lost and have reserached until my eyes are bleeding. I just don't know what the right choice is.

Thank you in advance!



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Dear Jennifer,

People ask me what they can do to escape the bondage of student loan debt all the time. It is a rapidly growing problem.

For the government student loans there are some programs that will help. Read The Ultimate Guide to Dealing With Student Loans You Can’t Afford.

The bad news is private student loans are a trap if you can't afford to pay them. The good news is there are some options.

You need to be very careful about leaping into deferment or forbearance options. While they take the pressure off right now, the loans continue to grow and then when you have to pay them the balances have exploded and become even more impossible to pay.

It is true in most cases you can't discharge your private student loans in bankruptcy. But one underutilized advantage of bankruptcy is it can allow you to pay what you can afford and limit the fees and penalties while you are in the five year chapter 13 payment.

At the end of five years your debt will not be discharged but what you gained was five years of a legally binding solution and no collection calls.

I realize this is not a perfect solution but I think the signals are growing the government will have to step back in again and either allow private student loan debt be discharged in bankruptcy, as it was up until 2005, or mandate programs to allow people to pay what they can afford based on income.

The Consumer Financial Protection Bureau (CFPB) is currently studying the private student loans disaster and will be releasing recommendations in the next year or so.

If you would like to explore this option you can find a local bankruptcy attorney here who can help.

I have seen Sallie Mae begin to offer most settlement offers and Frank Pipitone, a bankruptcy attorney, told me, he was able to settle one such debt for a client. "I was recently able to settle a student loan debt for 35 cents on the dollar. This was a client who was on the verge of filing Chapter 13 and the bank did not want to risk waiting 5 years for payment," said Pipitone.

Unless we can get this looming pressure contained it will continue to gnaw at you in so many ways. I can't imagine the quality of your life and your emotional wellbeing is helped by just kicking these loans down the road with the current strategy.

Let's get them contained, remove the pressure, and give you a positive outlook towards a better future and make room for good things to happen.

Steve Rhode
WRAL Get Out of Debt Guy

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  • steverhode May 15, 2013

    @rachel You are right. It was the mantra of a previous time.

  • rachel May 15, 2013

    For many people, student loans were the only way to piece together a plan to go to college and perhaps get ahead in life. Most peoples parents are not sitting on a huge pile of cash, after the expense of raising kids, to just hand colleges the full tuition costs. What no one predicted, but has happened,is that a college education is no longer a guarantee to get a good starting job. It used to be seniors would meet with a big bunch of job recruiters on the college campus and the graduating senior would have some options and choices. It is appalling that someone who graduated in 2009, hasn't been able to find a decent job in whatever field she studied. Terkel, it was not a want-it was a sound idea that the bottom fell out of. Student loans and a college education were supposed to meet up right after college at a job's doorstep-which would have made it a sound investment-instead, it has become a bad gamble,which is not the students fault.

  • research9 May 15, 2013

    Step 1 - make a monthly budget tracking everything (and I mean EVERYTHING you spend) Excel is great for this.

    Step 2 - single out where there is waste in your budget. $20 here, $50 there, can bridge the gap of $150 you say you are lacking
    Good places to look - cable TV (keep internet, helps with job search), cell phone plans (do you NEED data?), dining out, auto insurance (shop around)

    Step 3 - the not fun part, live as thin as possible to make the payments until you get a job. Consider parttime work for additional spending money in the meantime

    I'm not writing this to be mean. It's not going to be fun, but I tried this and was shocked to see what I spent on eating out and "fun". This avoids bankruptcy. Short term pain long term gain. There is a light at the end of the tunnel, just make it through.

  • steverhode May 15, 2013

    And I have previously done just that on my other outlets. I agree that it would be great if society was setup to say don't go to college. This recent segment on the Daily Show, perfectly spoke about this issue.

    But the issue for this person is not if she should have ever gone to college like probably her parents, school counsel, friends, and society said. And then she rolled into college and the financial aid office enabled her to borrow the money and the college earned a tuition.

    There is nothing in that process historically that ever said to stop and evaluate the decision. Student loan debt has always been considered good debt and what you do to get ahead.

    It's not a factual statement, just common wisdom.

    So let's help her where she is and provide a solution for today. We can't un-ring the debt bell.

  • Terkel May 15, 2013

    She took out the loans to pay for a "want", not a need, and now calls them a nightmare because she's paying what, $500/month? And gee, the poor woman can't even start a family - not because she can't afford to, not because she can't find a job, but because of "this nightmare"!

    I'm in just enough of a mood to point out that she has poor reasoning skills and minimal writing skills, so I wonder why she went to college at all and what, if anything, she got from it.

    I know you have to answer what's written, but I'm sorry to see you pointing out a way for her to get out of paying them. I don't mean forbearance, I mean the ".35 on the dollar" notion. Would you/have you written a column on ways to stay out of debt trouble by thinking long and hard whether to take out SL's?

About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.