I attended 2 private fancy institutions: Stanford University for Undergrad and NYU for Grad. While Stanford is indeed a pricey school, it was certainly financially manageable for me as a low-income, traditionally disadvantaged student. I received mainly grants and scholarships while attending, and came out of school in 2003 with a very low amount of debt: $16,200 from a Perkins Loan. This amount was lower than if I had attended college in my home state: Montana.
Now, on to the problem. Graduate school. Over the course of 3 years, I was a full-time student. The last 3, I believe I was a part-time matriculated student which in our program was when we worked on our thesis films. Did I mention I went to film school? (Insert chortle here). The cost of this education from tuition to fees to health insurance and all the other fees came out to be approximately $270,000. My student loan burden as of right now is $180,953.75 in Federal Loans (Consolidated – and not consolidated – Direct & FFEL Stafford Unsubsidized and Subsidized Loans, and Perkins loans to boot). I won’t bore you with the details. At this stage, I’m not concerning myself with my Federal Loans. They qualify for Income Based Repayment, and are sitting at a $0/month obligation to pay.
Now, my private loans ended up being about $75,000 for 3 loans. Each month I pay approximately $630 towards my private loans, and what I owe now amounts to about the same as when I graduated. (As a side note, I’ve paid easily $30,000 since 2011 on these loans. I don’t know the exact amount because my payment history went poof when another one of my loans was sold, for the 3rd or 4th time).
My AGI last year was $20,569, and that’s my best financial year since graduating in 2011. I’m not a spring chicken anymore, and neither a spent hen. But I’m feeling worried about my financial future. I can’t get a loan for a car or any type of loan really because of my debt load and earning history. I’m 36 going on 40 and still dependent upon my family for my career.
I have approximately $11,000 in savings (from a terrible car accident insurance windfall) and $3000 in my only retirement account (an IRA) this year. And of note, no one co-signed for any of my loans.
I’d like to pick up and move to a city where I will have more economic opportunity to increase my earning potential, but find myself in a bit of a catch-22 regarding income and debt load.
Should I default on my private loans, get sued and taken to court? Would it benefit me to try haggling with these 2 companies? Is there anything I can do with my Federal loans (further consolidation)? Any thoughts or advice to help ameliorate my financial situation and my future?
First off, thank you for making my day by using the word chortle. Your writing skills are superb.
Your situation is one that leaves me feeling like that movie Groundhog Day. I’d love to go back in time and try to persuade you from landing where you are now, but don’t worry, nobody listens.
So what are we going to do now?
On the federal loans the likely solutions would be for you to land a job with the federal or a state government or a non-profit so you can go for Public Service Loan Forgiveness. It’s not a program without issues but once you got your loans to be applicable and you had the right employer you could potentially have your total federal student loan balance forgiven tax-free after 120 conforming payments.
On the private student loan front, unless your lenders offer you some sort of loan program change, you are stuck. Unlike with federal student loans the consumer/debtor has little to no real options to request forgiveness or a real change.
So that leaves you with three primary options, in no particular order.
1. You Can Make the Payment – Keep tripping down the path you are on. But to make any progress towards retiring the debt you’ll have to increase your monthly payment instead of just treading water.
2. Fight the Good Fight – Getting a discharge on your loans through bankruptcy is a stretch in your situation but it does happen. Private student loans have all sorts of issues that a good attorney or exceptional bankruptcy attorney can poke and prod at. See this article.
3. Strategically Default – Having a plan and awareness about defaulting on your private student loans as a strategy is not illogical nor is it without pain. If you understand you have to get your loans in a situation where the lender will be more willing to take some action to modify your loans then you’ll understand why this approach can make sense. I would urge you to read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan
All we can do is deal with the reality of your situation today. As it stands you are a wonderfully underemployed NYU graduate film student whose likelihood of ever earning enough money to retire these loans would be like winning the lottery. I’ve dealt with enough NYU film grads over the years to know the field isn’t one in which you can print money unless you are one of the lucky few who gets called up to the big leagues.
You also are not making enough money to probably afford justice or real help from even an affordable debt coach like my friends Damon Day or Michael Bovee. Although that would be a really, really, really smart thing to do to help you come up with a comprehensive plan of action if you were going to default on your private student loans for a better outcome. Having an experienced coach in your corner is a powerful secret weapon.
It’s just on your current income it sounds as if you are just scraping by and there is nothing leftover to afford professional help. I’m not judging, just stating reality. In America it seems people get as much justice as they can afford, not deserve.