Student Loans

Loaded Up With Student Loan Debt From My Graphic Arts Degree and Want to Study Psychology

Written by Steve Rhode

Question:

Dear Steve,

I earned a bachelor’s degree virtually debt free with scholarships, hard work, books paid by mom and living at home. I graduated in the lovely year of 2009. Considering the job market at the time, I had naive hope that taking another year to get a Masters degree would put me in a better position in a recovered economy.

Long-Short. I mad bad decisions. I moved out and ended up forging onward to independence. That part was not a bad decision…

I was drawn into a private college with $38k tuition. It was so nice of them to give me a “star scholarship,” if I recall, $1,400 or $2,400, plus a mandatory computer and software purchase plus highly encouraged living expense loans, I think I got out of there with $42k in debt, having maxed out federal options. My effective interest rate is 6.75% with the 0.25% automatic withdrawal. I had a small 7.99% private loan but, paid it off first.

I didn’t seek internships because I was too good to work for free, had a few crummy retail and service peanut pay jobs over the course of the year. Between that and living loans, I was able to pay rent while digging in some credit card debt.

I wasn’t worried about the proposed $42k debt, being assured I would land a $60k plus job out the door, live frugally and pay it off in a year or three, even if I had to move back in with mom. LOL.

LOL…

I won’t say my education is lacking but, thinking I could immediately land a $60k job as an art director in a marketing agency in 2010 was pie in the sky. One year later, I have this degree, this debt, no relevant professional experience and an economy with 400:1 competition for jobs paying 30-50% less than they did before 2009…

I’ll admit in advance that I have maxed out deferment and forbearance due to inconsistent employment and avoiding homelessness.

Two months after graduating, I landed a job earning about $32k– not based on my degrees but, 5 years of relevant industry experience… The job should have paid double but, it was my first interview for a “real” job. With low self esteem and the desperation to succeed in adulthood, I took “this is what we’re offering. If you don’t like it; we’ll find someone else,” job.

I couldn’t afford $670 a month for 10 years. I had other, higher interest bills to pay. I totalled a car, got an auto loan, hypochondria, panic attacks, some small medical bills, signed up for the Federal student loan Income based repayment plan, i.e, 25 years of paying 15% of income when earning over $32,500/yr to “forgiveness.” $155/MO Min at that wage. $280/MO interest. I settled for $350/MO. I paid off personal debts, saved some emergency fund and periodically threw down a few hundred or thousand to offset interest accrual, and pay off the smaller student loans for tax credit and nudging down the principal. I even did a federal consolidation.

At this rate, I’d have paid roughly $130k and owe another $65k for “forgiveness” (in quotation because forgiveness means paying income tax on remaining debt) in 25 years. I BORROWED $42K! I paid off my car and sneakily refinanced a 2.4% rate and shoved a $12K lump at the damn student loan.

I held that job down for almost 3 years. My manager was super insecure about my being a 22 year old female with 2 more degrees, 5 more years in the industry and actual ideas. It wasn’t fun. It was terrible. But, I had a decent paying job in 2010. That said a lot.

The company was just priming itself for acquisition. It explained a lot of the barriers experienced in addition to a poor company culture… Post acquisition and witnessing multiple executives storm out, I landed a degree related job paying $42k with, the caveat of an eccentric family owned business and the job having a historical shelf life of 90 days. I said to myself, “that won’t be me. It’s a step up either way.” My resignation did not go well… Oh that’s it’s own bag of BS. “Your 2 weeks starts when WE say it starts, you don’t get your birthday off or you can forfeit your sick, vacation…” Yeah, I’m done. They cut off my Health Savings account before I even made it home.

The new job began with an empty office and the mysterious disappearance of what would have been MY employees… The CEO’S husband, with no discernable role and a corner office, had decided to clean house to “avoid drama.” 90 days and a 2 week severance package later, I was out of work for 4 months. (wow my life story is here… Sorry)

I landed a $40k temp job for the next 2 years, got comfy, paid off the car (again) and saved up to put an FHA down payment on a house with my “husband” (8 years together now) because the rent was getting too damn high. I didn’t qualify for the mortgage because I HAVE TOO MUCH DEBT. (Literally, just the student loans) Two weeks into the contract process. TWO WEEKS BEFORE CHRISTMAS, they let me go…

Oh, forgot to mention I have been saving some for retirement. Outside of 401k, I tried to throw $1k a year into an IRA.

The last 2.5 years have been spent between unemployment and temporary contracts. My IBR has me in auto draft (for that 0.25% discount) payments of $0… I’ve worked A solid part time job at $10/hr for the past year and just got a raise TODAY… 30 CENTS AN HOUR! WOO… I’ve given up on advancement after a two level promotion didn’t involve a raise… They Told me that after I started the new position and wondered where that $1 was…I get contracts here and there. Enough to avoid carrying credit card balances.

My income has been in the realm of $14k for the past 2 years. We have our house because my husband, who didn’t go to college, gets paid enough to cover the mortgage and whatever else he wants… I buy groceries, pay for utilities and necessities.

With real estate value up, we just refinanced our way out of the FHA to dump that lame private mortgage insurance, lower payments and replace a 45 year old HVAC system. I am on the mortgage now but, have been on the tax papers the whole time. We have a bit left for other necessary repairs.

The last time I looked at my student loan balance was for doing my taxes for 2014… When I had a decent income and afforded the highest interest tax deduction for the year. I was $1,200 away from polishing off a small loan that wouldn’t consolidate in for no apparent reason…

I HAD BEEN PAYING MY STUDENT LOANS ABOVE AND BEYOND IBR REQUIREMENTS, AVOIDING significant CAPITALIZATION FOR FIVE FRICKEN YEARS!!!!! I was basically paying more than half of what a 10 year term monthly payment would have been. AND I OWED $52K ON MY ORIGINAL $42K.

I had paid more than $15k on the BIG ONE in 5 years and owed over $12k more than when I started. I’m still on the IBR and plan to dutifully file every year for the next 18 years… I’m considered IN repayment/current/pays as agreed at $0/MO.

I imagine, at roughly $300 a month in interest… Possibly capitalized but, it shouldn’t be with this repayment plan…I haven’t paid a penny in 2 years. I just gave up. I haven’t even bothered to look.

I want to go back to school for a different degree. Something I’m actually passionate about. Psychology. Maybe it could net the pointless public service forgiveness plan as a public school counselor or caseworker. Work that won’t quite pay enough to make dents in a behemoth for 10 years, to get (I think) $15k forgiven… At least I’d enjoy the work. Maybe I could press the doctorate, become a Psychiatrist and charge $600/hr.

I doubt I can get anymore federal loans. Frankly, I don’t want more loans. I’m not positive on what I can get for grants or scholarships toward Graduate and/or Doctorate degree… Research grants probably .

My current employer does offer tuition reimbursement but it’s a pathetic, “Look at what an awesome employer we are to offer tuition reimbursement.” They just outsourced the department to save 15% or more (educating employees is like car insurance). It was hard enough for coworkers to get their reimbursement as it was….One specifically approved degree in Industrial Organizational psychology, that is only offered by 3 nearby private colleges, which employer may not approve. There are a good number of additional hoops that defeat the appeal of the benefit. If I manage to get reimbursement, it maxes $1,500/YR, depending on what they think is, “reasonable.” An admission representative actually laughed when I told her what they offered…

I’m tired of stagnating and feeling failed because I chose to power through college and my graduation gift was an economic meltdown.

Is there some super secret savior plan to dissolve my existing student loans?

Is there any way to get (another) graduate degree without paying out of pocket?

Maybe this is just a cry for some kind or reassurance… Because deep down; I know there is no “free ride.”

Pam

Answer:

Dear Pam,

There is no super secret way to deal with this unless you could possibly document your loans pose an undue hardship. The general scenario for people that accomplish this is they have an underlying mental or physical issue that makes future employment unlikely and there is no possibility of ever making enough to meet the minimum payment. Some courts have found the income driven repayment plan should not be used as a way to skirt bankruptcy discharge. But from your situation it does not sound like you meet the likely discharge scenario.

Yes, the income based repayments can be a terrible trap and we can only hope you are not solvent when your loan balance is eventually forgiven.

Have you looked into jobs with psychology degrees? I have a fair number of reader questions from people in that field that are struggling as much as graphic artists.

You might want to look at this page to see what your entry level opportunities may be.

Here is a post from two years ago about the 20 Highest Paid Jobs in the Field of Psychology.

So let’s say you could go back to school, take on more debt, and eventually graduate. It would appear your income potential is the same or less than the degree and skills you have now.

Look, I’m a follow your dreams kind of guy but I certainly can’t see where the math adds up for chasing that psychology dream unless you can pay for the degree in cash.

There is no reason you can’t pursue a Public Service Loan Forgiveness program if you just land a job with a non-profit 501(c)(3) or government agency.

I’ve heard what you have to say but remain unconvinced it makes logical sense.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.





About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

6 Comments

      • I honestly know I just need to work harder at finding my own work for self employment. That avenue hasn’t been completely fruitless. I’m the kind of person with loads of winning ideas, ADHD and near total aversion to risk. Yet I’m not consciously afraid of failure but of success. I have considered the mental heath defense but, the fact that future employment is possible doesn’t help me with that “cop out.” At least that’s how it would feel to me.

        It’s weird not to be a valued employee when, in addition to doing my job WELL, I’m the only one in the office capable of diagnosing and fixing the printer (if it doesn’t need parts), saving them the lost productivity and expense of collecting dust until management approves calling a tech. My biggest problem appears to be avoiding office politics and offering solutions to avoidable issues caused by employees who are simply trying desperately trying to keep their jobs relevant.

        When you say “not solvent,” I had to look that up. You mean you hope I don’t have the ability to pay the income tax on money I don’t have? I have seen people work with the IRS to lreduce back tax and payment plans but, I imagine that doesn’t get me out of the situation I’m already in. The only difference would be the creditor… The Department of Education becomes the IRS…

          • The magic of knowing one’s way around this loop-holed maze of the American tax system. There really is a way to get our of paying almost anything. It’s sick, yet reassuring to learn that an American citizen can get off as easily as a Corporation or Billionaire.

            I’ve been doing my own taxes since I was 17. I appreciated when Turbo Tax came out . It’s always good to learn about more forms. I have discovered the glory of an LLC.

            It must great for the IRS, to see that Tax season has been so well capitalized upon. Those temporary seasonal Tax Preparers charge hundreds per return and all they do for most is file a 1040ez on Turbotax on the Tax Payer’s behalf. Does the layman know what they are missing? The IRS must save so much money

            ADD Thought…
            I wonder if the Mega Tax Preparer’s Corporation goes further up the ladder to file additional documents on the Tax Payer’s behalf and takes the payout without them ever knowing the difference. Yeah, I’m sure you are about to say, “Pam, that’s illegal.” Then I counter, “tell me the last time C-Levels of any Financial Institution went to prison for more than 2 years, if at all– for screwing over entire countries.

            Bernie Madoff was small potatoes and simply ripped off the wrong people– Tongue Twister coming up…

            Florida is full of Fraudsters defrauding Frauds while Fraud Attorneys defend Fraudsters from Frauds.

            I only know this from living in the heart of the moneyed beast that is Palm Beach County– The home of Mar-A-Lago. Unfortunately, I wasn’t in the club.

            Next up: The Straw Man argument of Sovereign Citizenship and, to what country will Sovereigns be deported?

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