Question: I am 32 years old and graduated with an associate degree in occupational therapy. I owe $25,000 in federal student loans and $60,000 in high-interest private loans, even though my mom is a co-signer. I went to a great college: it was private and expensive, but I have learning difficulties that they were able to address. But I will never forget that at the beginning of 2018 my teachers told me that by the time my classmates and I graduated, we would probably have a hard time finding a job because of the changes in the profession. . Well, they were right. And of course, after taking out these huge loans, it was too late to fix it.
I graduated, the pandemic hit, jobs were scarce, and despite researching and applying for everything I could for nearly two years, it didn’t matter. So now I’m going to work for eight years in a group home where I get paid $16 an hour. I sometimes work over 50 hours a week and also support a severely disabled adult who is 100% financially dependent on me. I barely make paycheck to paycheck.
I feel like I will never be able to pay my payments, even if I find a better paying job. I feel like I have a useless degree at this point. I would give anything to go back and not go to college at all. It wasn’t worth it. My credit score plummeted after missing a payment, and I already have a mountain of other bills that I owe from credit cards and medical bills. I am literally trapped by these loans. I have no payment options that would allow me to pay them back and refinancing is not an option because my credit rating is so low. (Note: For those with private loans and a good credit rating, these are the lowest student loan refinance rates you may qualify for.) I can’t afford legal aid. I am trapped. Going to college ruined my life.
To respond: Private student loan borrowers, unfortunately, have fewer safety nets than those with federal student loans, but the first step you should take with your private loans is to contact your lender to temporarily lower your payments or negotiate a new one. repayment schedule, say the pros.
It may or may not provide the relief you need, so the pros say to look elsewhere too. “You may benefit from specific loan advice from The Institute of Student Loan Counselors (TISLA) or individual financial counseling by someone certified by the National Foundation for Credit Counseling (NFCC),” says Anna Helhoski, student loan expert at NerdWallet. TISLA is a non-profit organization that offers free counseling to student borrowers and the NFCC is a non-profit financial counseling organization that offers debt management plans, student loan counseling, report reviews solvency and more.
Andrew Pentis, certified student loan counselor and higher education finance expert at Student Loan Hero, also says it’s wise to consider the option of enrolling in a debt management plan with the help from a low-cost, non-profit credit counseling agency. “That way, they’ll only have one monthly payment instead of several and might even see a reduction in their interest rates,” says Pentis. “In contrast, a debt management plan would suspend their ability to borrow for that three to five year period, and it would take even longer after the fact to build a positive credit history,” says Pentis.
For your federal student loans, consider an income-based repayment plan (you can see the four types here), which “fixes your monthly student loan payment at an amount that should be affordable based on your income and family size,” the government notes. Then, often, after 20-25 years, depending on the plan, the loans will be canceled.
Another thing to consider is the Borrower Defense Loan Release Program for Federal Loans, which helps borrowers who have been misled by their schools. “If the reader believes that her school of occupational therapy misled her about her job prospects, before the professor pointed out the reality, and she has documentation to that effect, it might be possible to pay off some or all of the federal borrowing debt,” Pentis said. The borrower defense rules have fluctuated with each change within the Department of Education, but the most recent changes are making it easier for struggling borrowers to qualify, particularly because in March 2021 the Department announced that it would streamline the program’s approval process to provide $1 billion in relief to 72,000 borrowers.
Bankruptcy can be an option, but you will need to find a way to pay the lawyer, and student loan debt is often very difficult to pay in bankruptcy. Because funds are already tight, you may want to ask friends or family to help pay for an attorney’s fees, work out a payment plan with an attorney, or even seek out an attorney who voluntary practice. But Pentis says, “Bankruptcy may not be the fresh start that is often imagined, as it is not guaranteed to pay off 100% of a consumer’s debt. It will also seriously damage their credit report and score for years to come. While not the ideal solution, ultimately if your low income, dependent responsibilities, and medical constraints make it impossible to repay student loans and other debt, bankruptcy could bring some measure of much needed relief.
Conclusion: “There is unfortunately no quick fix or easy fix, but there are resources to help you cope and stay afloat,” says Helhoski.
Questions edited for clarity and brevity.