Thread: SCHOOL LOANS are crushing me...what can i do?

Hi.
I have excellent credit (700+) and just a couple of credit cards that I use very responsibly. I have no other debt - except my student loans. I owe $90,000 (about 10% to Sallie Mae and 90% to a private loan company). My student loan payments are more than I pay for rent. I work hard and can't seem to get ahead - and the loan servicing companies won't work with me. I have deferred several times to give myself breathing room but that has only made the problem worse.

What can I do? I have great credit so I don't know if reorganizing through bankruptcy would work (as I know that Student Loans can't be discharged through BK). Does anybody have any ideas? I'm dying here!

Any information that you could provide would be helpful...please be nice.

Thanks,

bp

At least you still have the asset the student loans paid for: your education.
If you are at least keeping up, even if barely, then your debt is dropping. You are not getting nowhere, you are actually increasing your net worth. More like buying a house with a mortgage, where you get to live in it as you pay it down.

What are the rates on your student loans?
At what rate are these loans being paid down? (How much in principal per year?)
How long until this debt is paid off?

Look at increasing income, or decreasing expenses.

Is your current job paying competitive with what you might be able to get based on your education and experience? What is your degree in? Is there opportunity for advancement?

Have you already trimmed discretionary spending? Cable? Excessive phone costs? All eating out? Magazines? Movies?

If you have to do it, it is cheaper to do it up front, where the savings can compound, rather than later if you have no choice. You might either try to pay down your loan debt faster, or save it to plan and be able to change jobs and locations if a better opportunity comes up.

This is a difficult problem for most of us. We need good credit but can't afford to live in light of or educational loans.

Here are some suggestions . . .

1) Ask for interest only payments until your increase occurs in pay,

2) Shop around for consolidation (this would have been better pre July),

3) If you cannot afford these payments whatsoever, consider . . .

a) looking at discharge through bankruptcy (it is not totally impossible albeit extremely difficult),

b) walking away until you can rehab the student loans (it may trash your credit for seven years and you may be garnished).

1. Get $1000 Emerg Fund in Savings account.
2. Monthly $0 Based Budget Living expenses. No Debt.
3. See where you can cut expenses. Cell phone plans. Internet. Home phone options. Direct T.V. Eating out. Clothing. Groceries. Car loans. Cut up credit cards. Stop spending.
4. Allocate biweekly pay into envelope system for categories of bills, supplies, car repairs, gas etc.
5. Start paying down debt. Stop saving. Stop investments. Pay off debt from the least to greatest.
Ex. Credit card is $2500 School loan A $20,000 School loan B is $10,000
Pay minimum payments on all other debt and pay the large sum on the credit card to pay off fast. Then move to the next debt with same idea.
6. No to Debt consolidation. That's a scam. It doesn't work.
7. Second job. Sell stuff on ebay, craigslist, garage sales. Sell a vehicle if you have more than one. Car Auctions are great.

I 've taken a financial course that works to get out of debt and get control of your finances and make them grow.

There is a guy named dave ramsey. Look him up sometime. Call him.

Can you really get rid of student loans via bankruptcy? I was under the impression that thisa was not possible...

Originally Posted by sleepylil

Can you really get rid of student loans via bankruptcy?

I think its better to approach debt management companies they will provide you valuable advice on student loan as well as bankruptcy.

I have to disagree with peace on several issues. First, NEVER pay off debt based on balances. Pay it off based on interest rates. Minimum payments on everything except debt with the highest interest rate, all other money to highest interest rate.

Of course, something like a student loan is usually a decent rate so pay minimum on it and use the rest to pay off higher interest rate or set some money aside.

$1000 is not much savings. You should have at least 3-6 months of expenses in the bank in case you have a crisis like a job loss or a major illness.

Don't stop using credit cards entirely. If you don't use revolving credit your score will go down. But use the credit cards for necessary items and pay off each month. That way you keep your credit intact but don't run up debt. If you want to use the "cash in an envelope" system, then take the cash that you would pay for, say, groceries or gas and move it to an envelope for the credit card payment. Then you'll have the money to pay the card when the bill comes, you'll be building your credit, and you're learning to use credit responsibly.

If you can get a card with a rebate, you will actually pay less than you spend, as long as you pay in full every month.

Originally Posted by Hedwig

I have to disagree with peace on several issues. First, NEVER pay off debt based on balances. Pay it off based on interest rates. Minimum payments on everything except debt with the highest interest rate, all other money to highest interest rate.

I have to disagree on this, at least to a certain extent.

If your highest interest card carries a huge balance, and you've got half a dozen other cards with smaller balances, it's often very productive to pay off the low balance cards for two reasons:

1. It provides the borrower with a boost in self-confidence -- s/he can see that actual progress is being made at paying off her/his debt. As in, look: an actual account was PAID OFF! This helps provide INCENTIVE to the borrower to keep at it by showing tangible progress (instead of just a HUGE number changing to an ALMOST HUGE number on one single card).

2. By paying off a credit card, you can now roll what you used to be paying towards that card into the next card. And when that one is paid off, roll BOTH of those into the next. Hence, the "snowball" effect. If you have 6 cards and can pay 4 of them off completely in 6 months, then tackle the last two (with large balances) by rolling all the previous monthly payments (from the other cards) into THOSE cards, it really helps.

It's NEVER more productive to pay off lower interest rates first. If the borrower wants a boost in self-confidence, they get it from the bottom line of the spreadsheet they should be keeping. On the spreadsheet, you list every debt. Include the balance, interest rate, and any other information you want to track (I have minimum payments and due dates on mine). Sort by interest rate so you know what is your highest rate. This is the one that gets EVERY PENNY except minimums on the other accounts. The more high interest you pay off, the faster that bottom line of "Total Owed" will decrease. You do this every month so that you are always paying extra on the highest-rate account. That account could change each month as interest rates change, but you always want to knock out the highest rate debt first. Otherwise the principle of compounding is working against you.

And you DO use the snowball effect. Minimums on everything but the highest rate, all other money to that one. When it's paid off, that amount will be added to what you pay on the next highest.

The principle of compound interest says that the higher your rate, the faster your balance increases. And therefore the amount subject to that higher rate keeps increasing.

Originally Posted by Hedwig

It's NEVER more productive to pay off lower interest rates first.

That's your opinion, and I respectfully DISAGREE.

I've watched people GIVE UP because they didn't see enough progress. And, I'm sorry, but watching numbers on a spreadsheet change does NOT provide the same type of incentive as, say, actually PAYING OFF three or four credit cards with that same amount of money.

If the borrower wants a boost in self-confidence, they get it from the bottom line of the spreadsheet they should be keeping.

Again, that's YOUR opinion. Not everybody reacts to the same types of incentives, so saying that paying off lower interest rated cards is "NEVER" more productive is completely relative.