Question:
Dear Steve,
I was the oldest of 3 children, my parents did NOT go to college and are themselves very young and have never had much money to do smart or dumb things with it.
I had a troublesome senior year and was determined as an 18-year-old to get out of dodge (Upstate NY) and go to school in Florida. What seemed like the most ideal situation at the time was to go to a private school that was offering my some financial lee-way ($25,000 a year) so my mother co-signed on a private student loan to cover what the federal government loans wouldn’t pay.
Fast forward to graduation when I’ve decided to earn a bachelor’s degree in psychology. I decided to move home, and to grad school in-state which was covered by federal government loans.
During the course of my schooling, I endured victimization of my own and have since chosen to work as an advocate for victims at a non-profit. Unfortunately, Non-profits don’t pay great which leads me to my question.
My credit and mother’s credit are being impacted because I cannot cover my private student loan payments.
My second job randomly cut my hours which subsequently impacts what I make weekly by roughly $300. I have since drained my savings and now cannot cover all of my bills but primarily the private student loans the past 3 months.
I don’t know if I will ever make enough at my non-profit job to fully pay off this loan. What should I do??
Haley
Answer:
Dear Haley,
I’m kind of stuck on what to say. As you can see this seems to all go back to that day the Florida school was selected. It seems it was more than you could qualify for in loans in your name. But I bet it felt like the right choice at the time.
Your mother agreed to co-sign some private student loans to help you go where you wanted to.
When your mom cosigned on the private student loans she tied a noose around her neck. Your mother is 100 percent responsible for those loans if you fail to make the required payments. Your payment history impacts your mother’s credit report.
I certainly support any path you want to follow. But keep in mind those choices previously made have consequences.
The consequence of following your passion is you just can’t earn enough money to pay for the loans you agreed to pay when you took them out.
Private student loans have the least flexibility when it comes to repayment plans. Federal loans at least offer income-based repayment strategies.
You have a few choices:
- Ask your mother to make the payments to protect her credit.
- Quit your job and find one that pays more so you can make the payments. So many people have to give up their passion just to try and make ends meet. But this is a problem that graduates for decades have faced when they are unable to work in the field their degree is in.
- You and your mother may want to examine a strategic default strategy if you simply can’t afford to make the required payments. Defaulting on the private student loans has consequences but if it is done with a plan and purpose it can lead to settling the student loans for less than you owe. It can also expose you to legal action and tax issues. This is not something that should be embarked on casually.
I want you to take a few days off and get as depressed and angry about this mess as you can. Then, pick yourself up and work to come up with a strategy to do something to deal with this situation.
It’s a mess. It sucks. But there are still some options you can choose.
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.
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I sympathize with Haley. I had a good job practicing law but I wanted to become a college professor so I enrolled in a doctoral program at Harvard University. What could go wrong? But within weeks of beginning my studies I realized that Harvard’s Education School faculty were not as brilliant as I assumed they would be. I attended classes with as many as 200 people in them.
I was sophisticated enough to know that I should borrow as little money as possible, and I got through the doctoral program owing only $22,000 (this was in the early 1990s). Nevertheless, my student loans were a hardship because my first university job–a tenure-track professorship–only paid $40,000 a year.
Too late I realized I would have been much better off getting my doctorate from a much cheaper public university. In fact, if I had only shopped around, I probably could have gotten a full scholarship somewhere else. I consider the three years I spent at Harvard to have been almost a complete waste of time (although I did have a couple of good professors).
We all have to realize that attending a prestigious but expensive university is not always a sound move.
I wish I had the magic answer to help people understand that the day before they decided to go.
Asked question.
Answered.