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

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...

 

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.

 

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.

 

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.

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.

 

While it may make you feel better, it's not in your best interest. If you want all your debts paid off the fastest, and if you want to build wealth, you will quickly learn the laws of compound interest--and how it works against you.

You will not be able to show me a single example with real numbers where paying off low-interest debt will get you out of debt faster. It's simply impossible. While you're paying that off to "feel good" the higher interest debt will pile up even more, making your total journey out of debt even longer.

 

Again, your opinion is duly noted, but it is just that - an opinion. You're only seeing one side of the coin: What will save you a few bucks in interest IF you complete your repayment plan. The benefit you're ignoring is the bigger picture: someone quitting without completing his plan vs. someone paying off all is debts, even if it costs him a few more dollars in interest charges.

The fact of the matter is: not everybody is incentivized in the exact same way. Therefore, seeing actual progress of smaller cards/smaller balances being completely paid off versus watching a number on a spreadsheet changing most certainly is "more productive" and serves as an incentive to SOME people to keep them on track than the alternative (becoming discouraged and quitting his repayment)

If a person works his debt YOUR way, gets discouraged (which many do!) because he doesn't feel he is making progress, then QUITS, how is that more of a tangible benefit than someone who works his debt MY way, *continues* his plan while feeling that he is making progress, and eventually pays it all off?

The way I see it, I don't care WHAT your incentive is (a number on a spreadsheet or the bringing of a balance down to zero), nor how much interest you might pay -- if the end result is comparing someone who GIVES UP (your way) versus someone who COMPLETES his plan, I believe that most reasonable people would come to the conclusion that your statement of "It's NEVER more productive to pay off lower interest rates first" is, in fact, not completely accurate.

Note that I did NOT say your way was "more FINANCIALLY productive". Of COURSE paying less interest is "more FINANCIALLY productive".

Sure I will: Quitting your plan and NOT paying off your debt because you become discouraged will make your 'total journey out of debt' INFINITELY longer and is NOT "more productive" than paying it off, even if it costs you a little more in overall interest costs.

 

I am in a similar situation. I had deferred my private loans several times. Finally they put me on a program that allowed me to make interest only payments for 18 months. It has helped immensely. I would check with your borrower to see if they have any other programs besides deferment.

 

The way I see it..is you can only do what you can do. This is strictly my opinion, and what I would do, in your situation ..

I would 1st - pay yourself. Put some in savings to help build an emergency fund.
2nd - I'd pay all nessecary bills i.e. rent, utilities, food, get rid of all other unnecessary bills. (if you have a home phone, cancel that and use strictly cell phone, if you have all the perks on tv, take yourself down to limited options) all these will give you that $ you need to put towards your school loan.
Using what's left of the money - pay your other bills. If you don't have enough to pay all the mims on it, see which one is going to add more fees to your balance for not paying the mim balance. For example if your school loan charges a $25 fee for late payments, CC #1 charges $45 late fee, CC#2 charges a $10 late fee, I'd pay the mim on the school loan and cc#1 first before I'd pay the full mim balance payment on cc#2 - does that make sense?

Basically -if you don't plan on buying a home anytime soon - and it's better for you to rent - my suggestion would be the above - yes it may affect your credit, but if you're not needing your credit right now - then who cares .. I don't mean that you shouldn't care about your credit - just in the fact that I wouldn't beat myself up about it until there was something I could do ... this is hard for you to control since it's a lot of $ - so like i said earlier - just do what you can. There are always credit repair people who can help you fix it when the time is right for you.

Hope I've been able to help. Good luck!

 

I would not beat yourself up over this. Reduce you spending and cut your monthly expenses and if you are not able to make all of your student loan payments then so be it. You can always repair your credit. It is not the end of the world. Thanks! Heather with BoostMyScore.NET

 

Any updates from the original poster? What is your situation like now?

 

I don't know why everyone keeps focusing on your credit card debt. Perhaps they did not read your inquiry carefully? I see you state you have only a couple of credit cards which you use very responsibly. That tells me you either pay them in full at the end of each billing cycle, and/or you keep a very low balance. That's great!! Even though you have no other debt, I can see how student loans could kill you financially all on their own. It's a problem for so many young people these days. The good jobs require you to have a BA, but how are you suppose to get that without money? Student loans of course. And afterward, it's sink or swim. And unfortunately, student loans absolutely CANNOT be discharged in bankruptcy. So what are you left with?

There are a whole lot of suggestions about trimming the fat in your spending habits. I'm going to guess you've already done that as best as you can. I don't know what your schooling is in, so whether or not you can find a new position that will provide you a higher income, only you can know.

I honestly don't get the "more like buying a house with a mortgage where you get to live in it as you pay it down" notion. I suppose that could apply 'If' you were able to take advantage of actually living in the house. If your education is advancing you in your career, then you are living in the house. But if having that education is doing nothing for your future earnings, that concept may not so easily apply.

The truth is, you have to pay the student loans off. Whether or not you can consider your education an investment or not is up to what you do with what you've learned. If you are at the bottom of your field working your way up... than you are definitely in a good place and you just need to keep plugging along.

If you're only paying interest on the student loans... you're not really helping yourself all that much. Sure it's good for your continued good credit score... but... if it's not taking the principle down at all, in the long run you're hurting yourself. I ended up putting every single extra dollar I could into paying the loan. Even one dollar extra will help. I know it sounds small when the total is so high, but it helps. I started doing a few extra odd jobs to make a few dollars toward higher payments... it was hard. It seemed like all I was doing was working to pay off my student loans... but I did it, almost... I have about six months left now and I'll finally have it over with. You can do it... just keep plugging away. Remember, YOU ARE WORTH IT!! It's not just about having the education needed to get a great job... it's about all the knowledge you learned and retained. That, my friend, money can't buy. So it's certainly worth every penny you have to pay to have it. Good luck. Keep up the good work.

Oh, and I'm sorry to say, there really is no quick solution. Just do your best to find the right job and/or extra odd jobs to help you pay off as much as you can each and every month. The more you pay toward it each month, the better off you'll be in the long run.

 

Student loans cannot be discharged and therefore filing for bankruptcy would not work for you in this case, however most loan companies who have purchased these students are willing to work-out a payment plan that will suit your needs.