Student Loans

I Got a Degree in Painting and I’m Drowning in Student Loan Debt

Written by Steve Rhode

Question:

Dear Steve,

I graduated in 2005 with a master’s in fine arts (painting) with over $110,000 in debt. I’ve struggled my whole life. I am a high school teacher and make $42,000 a yr.

I am 38 years old, I want kids but can’t afford them. I just filed bankruptcy 1.5 yrs ago to wipe out credit debt (accrued from living poor w/ student loans and my fiance could not work for 2 yrs).

Now that I do not have any credit debt, the student loans are asking for their money now. I was able to get $17,500 taken off my federal loans for being an ESE teacher.

After paying on the loans since I left school, I owe the following: Federal loans are at $57,000 (they indicate it will take me 15 yrs to pay off at $189 a month, 3% interest) and two private loans, one has yet to call me ($15,000) and the other is $10,000 (they state I can pay this off at 7.5% interest, $250 a month in five years) that seems unlikely to me but I don’t know how to figure out if it’s correct.

My parent’s co-signed on these so anytime I miss a payment, they harass my parents and they are scared of not helping though they are in debt themselves, over $350,000! So they can’t either!

My friend ignored her loans and seems fine. I have no kids, no retirement savings, no emergency funds but I am scared of defaulting and do not want to hurt my parents and wonder if it is best to pay the $500 a month for the two (the 3rd one hasn’t contacted me since the bankruptcy) or if I should stop paying and save for my future?

Thanks so much for your help. I feel so stupid for getting into such a mess that has burdened my whole life.

Do I quit paying my federal and private student loans over $80,000 or do I make the monthly minimums for the next 10-15 years and not have much of an existence in way of savings, etc?

READ  I Co-Signed for a Private Student Loan and It's Killing Me

Could my parents also be sued if I do not pay my loans?

Thanks again for your advice!

Juli

Answer:

Dear Juli,

These kinds of questions are always difficult. For the most part, the ship sailed on this situation the day before you decided to embark on this expensive journey for a degree which is not returning you the amount of income necessary to service the financial commitments.

I don’t want to beat you up over the past financial situations we can’t undo. For anyone reading this who may be thinking of going to school and spending a lot of money for education, a cost-benefit analysis is prudent these days. Will an investment in education result in the outcome desired? Most people fail to realize the majority of people that start higher education, never complete it. They have the debt and not the degree.

On the federal student loan front, you do have repayment options that result in varying monthly payments. However, the plan you are on now seems reasonable.

So the sticking point seems to be the $25,000 in private student loans your parents co-signed for.

I’m sympathetic that your parents don’t want to be hassled or have to be obligated to make the payments on those loans. But the reality is that is exactly what they signed up to do. When you co-sign for a loan you are legally agreeing to be 100 percent responsible for the loan if the borrower can’t make the payments. It is literally their primary responsibility as co-signers.

Do not default on your federal student loans.

If you consider defaulting on your private student loans you need to understand:

  • The lender can go after your parents for payment.
  • It will negatively impact their credit score.
  • You and/or your parents will be the subject of debt collection activity, potential legal pressure, or lawsuit.
  • Defaulting will inflate the balances you owe.
  • You may elect to strategically default on entirely unaffordable private student loans as long as you and your parents are on the same page. This might result in a settlement offer to repay less than the balance you owe. See Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.
  • Any debt written off by the creditor could result in some income tax due from the forgiven debt and a negative entry on your and your parents’ credit report.
  • There are no clean wins here. Everything has consequences, including getting a higher education.
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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.

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