I’m Drowning in Private Student Loans. – Kathy


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“Dear Steve,

I graduated from an affordable college four years ago with $70K in student debt. Because my parents made $200K per year, but were unwilling to help me pay for college, I was ineligible for sufficient Federal aid, even loans. I was forced to finance college through a private lender, which I was lead to believe adhered to the same rules as Federal loans. I was wrong.

Shortly before graduation and well before repayment, my 2-5% interest rates skyrocketed to 10-20%. I have faithfully made complete $800 payments on time every month since repayment began, a fact which forces me to live paycheck to paycheck on $40K per year, but I am not even covering the accrued monthly interest. The loan amount has grown to $104K.

I have little savings and my credit cards have now become a problem (nearing $10K) because any emergencies (car problems, vet bills, household repairs) cannot be covered in cash and I do not have the room in my monthly budget to pay off the cards, which was my ritual throughout college.

Due to to the current financial crisis, my credit card interest rate have jumped to 28% from the promotional 10%, which was supposed to be maintained as long as all payment were received on time. They were, by the way.

In spite of all this, I still maintain good, if overburdened, credit.

I feel completely hoodwinked by the system and my family, and intensely angry at myself for not being smarter. Due to exclusionary laws, no student debt can be discharged under ANY bankruptcy law.

The cherry on top is: I was just laid off. Thankfully, my savings and unemployment will suffice. All of my student loans are now in forbearance, but only for 3 months instead of the promised 12 months, just because they can.

I plan to be married next year. I want to start taking real strides to solving this problem so that my new, married life can be as close as possible to debt free.


Dear Kathy,

I’m afraid yours is yet another classic case of not all student loans are good loans. It bothers me terribly that young people start out life so burdened in debt. And one argument I often hear is that at least the student loans are being used to improve the person and get them a degree which will lead to higher earning potential. But only about 34% of students that start with loans ever complete their degrees.

Student loans are one of those things that we can no longer assume are good or worth taking out.

Congratulations on the upcoming wedding. You should not put off your plans because of the student loan debt. It’s going to be around for years to come, I’m afraid.

Up till this point your student loans have been marching backwards. Even in forbearance they continue to build up interest and that just leaves you with more to pay. Your best chance of digging yourself out of this hole is going to be to use the combined income of you and your new spouse. Hopefully you will then be able to pay a lot above the monthly interest charge and that will reduce the total amount that you owe.

Private student loans are not like federal loans. They have fewer options and seem to leave the borrowers in a real jam.

Your only real option would be to seek out a student loan consolidation loan with another private student loan lender. You could try the lenders below and see if they might be able to help.

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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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