I’m Drowning in Private Student Loans. – Kathy


“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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7 thoughts on “I’m Drowning in Private Student Loans. – Kathy”

  1. This is really good news for the students that a private student loans is going to be drowning by Kathy this is a good work that he is doing this will help so many of students and will the student more flax able for there study.

  2. This is really good news for the students that a private student loans is going to be drowning by Kathy this is a good work that he is doing this will help so many of students and will the student more flax able for there study.

  3. How can you post to do loan consolidation? NO one will consolidate now. Basically you are screwed. Thats it. The bankers have gone and put our “elected” officials in their pockets, probably paid their student loans off.

    Because of this you are amongs many others and you are just going to be in debt teh rest of your life. Its pretty much better to just get out of High School and go work for someone, yeah you might not get paid that much but after bills you will be in the same situation.

    Until then go here and sign petition


  4. Hello Steve/Cathy!
    My wife and I have been in the same situation. When we graduated we had $90,000 in student loan debt. Everyone thinks that we messed up in some way, but looking back, it was the only way to obtain our degrees. What really hurt us is the origination fees which accounted for $20,000 of the debt! Plus, they have the opportunity to get you with interest! Something should really be done to better control private lenders and their predatory nature on young adults.

    Luckily, my wife and I were able to get good paying jobs (even in the slumbering economy…August 2008). If we weren’t then we would have been unable to make our monthly payments, so we feel blessed. Along the way, I have been focusing on small daily decisions that accumalate over time to create long-term wealth. My main perogatives right now include buying into my companies 401(k), using the debt snowball method, and purchasing $100-$150 of additional stock once a month to take advantage of the low stock prices. Basically what I have done is decided on a monthly amount ($2600) that is applied to debt & savings. Anything under that amount, and the additional amount is applied to my LOWEST AMOUNT debt (not lowest APR). This ensures that this debt will be paid off quickly, thus freeing up one more payment to apply to the next lowest amount debt.

    Please share with me My wife’s and my journey to the ‘Switch to Riches’ at http://www.switchtoriches.com. Included is the decisions that we make everyday in order to maximize our long-term wealth. This is a genuine, honest daily evaluation of our goals and how we are planning to achieve them.

    Best of luck to Kathy and everyone else who have been put in such a bad spot after graduation!


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