I’m 22 Years Old and Can Barely Get By. – Mark

“Dear Steve,

Hello, my name is Mark. I am only 22 years old and I have more debt than I can handle. I have about $25,000 in debt altogether. $7k of it is a car loan, $10k of it is school loans, and about $8k in credit card debt. I only make about $800 a month and I can barely make it from week to week just making the minimum payments, yet alone paying anything off.

I have been in this same situation for over a year. I haven’t charged anything other than a set of tires in over a year (close to 2 years I think). I only charged the set of tires because my current tires were dangerously bald and slick on wet roads, yet alone snow which I have to drive on to get to work sometimes. I can’t seem to get anything paid off at this rate and therefore I can’t work towards any of my life goals. After being out of school for a semester or two, I’d like to go back, but I can’t afford it and I can’t afford to take on any more debt. I also am in dire of need of getting an apartment, because I can’t live where I am living currently for too much longer. But in my current situation, I don’t see how I’d be able to get an apartment.

Just my minimum payments, car payment, and car insurance add up to over $600 per month, leaving me with under $200 (if its a good month) for gas, food, and necessities. I am working two jobs trying to keep up with everything. They are two part time jobs without guaranteed hours, so some weeks I work as much as 50-60 hours and some weeks I work as little as 20-25 hours. One of these jobs is a 50-mile round trip commute, which takes up quite a bit in gas. So after all my payments and gas, I barely have enough left to eat on, so I can’t get anything paid off. I’m already living on barely anything. I haven’t bought new clothes or games or anything like that for myself in almost a year, I don’t eat out much, I quit my gym membership, and I did many other things to try to cut down on spending, but I still can’t get anywhere. I’ve had no option but to miss a few payments here and there due to not being able to pay them, and right now I’m behind on a few cards.

I have talked to my creditors and have been trying to work out lower interest rates and minimum payments. I have had some success, but I am still struggling. I managed to get one of my credit cards, which I owe $2700 on, down to 4% interest and $60 minimum payment until paid off. I also just talked to my creditor with the biggest credit card debt (I owe $4500), and I managed to get them down to 6% interest and $84 minimum payment. My other two credit cards which I owe on are in the $500 range and have minimum payments of about $10-15, so I didn’t see the point in trying to bargain these down. I’ve had to use some forbearance on my school loans, and am in the process of seeing about being put on an income-based repayment plan for these loans.

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I thought about trying to sell my car and get a cheaper, more fuel efficient car (I have a 2002 Mustang GT). However, I can’t seem to find a viable way to do that for multiple reasons. First off, I owe as much or more on my car than I could sell it for. So I couldn’t get the title to sell it unless I either sold it for enough to pay the loan in full or had enough extra money to finish paying the loan off. I also couldn’t afford to buy another car before selling this car, and I would have nothing to drive in the meantime if I tried to sell my car and then look for another car. I’ve even thought about trading it in on another car, but I can’t afford to go into more debt on a more expensive car, and it seems nearly impossible to trade it in for a cheaper car without being ripped off.

So, here are my questions thus far in my quest to conquer this debt. Do you have any tips for what I can do to better my financial situation? Is bankruptcy even an option considering most of my debt is an auto loan and school loans? Will me having started a hardship program on a few of my credit cards significantly damaged my credit score (which is probably damaged anyway due to missed payments)? Would it be a good idea to try to sell my car for a cheaper car and how would I go about this? Is it a bad idea to try to be put on an income-based repayment plan for my school loans?


Dear Mark,

Ultimately this situation is less about too much debt than it is about too little income.

Depending how far along you are in your studies it might make sense to head back to school and finish that degree. Otherwise you’ll only be left with student loan debt and nothing much to show for it.

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In fact, since bankruptcy is not a hurdle for getting government backed student loans, if you do go back to school it might make sense to go bankrupt and discharge the cards and hand the car back.

Being back in school should defer the student loans so you’d wind up with no bills to pay now. And ‘now’ is the opportune point. At some point that student loan will need to be paid back. Going back to school does not make it go away, just hibernate and grow with interest.

For transportation around campus, get a bike or a cheap beater car.

The bankruptcy route seems like the only way you’d be able to hand back the underwater car and get out from the loan. So that, combined with your credit card debt makes considering returning to school and discharging your current debt with bankruptcy, a logical approach.

The good news is that while it might feel you are trapped in your situation, there are a few options to help you change things for the better.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach

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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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