Question:
Dear Steve,
I have approximately $90,000 in private student loan debt which I took out for my undergraduate degree. About half of that is interest.
Throughout my undergraduate degree I was unable to get federal loans because my mother hadn’t paid her taxes in many years. I had planned on making big money as a doctor or attorney, but as it turned out…I became a teacher and I make $34,000 dollars per year.
I consolidated these loans several years ago and my husband (now ex-husband) cosigned for it. The current payment would be about $850 dollars per month, though I have a temporary forbearance on account of my divorce. However, that payment is due very soon.
Additionally, I owe over $13,000 in credit card debt (minimum payments are over $300). I also have federal student loan debt that is deferred, since I’m currently in school part time, accruing more debt to become a nurse so maybe I can afford myself.
Ultimately, I love my job and it makes me sad to be leaving the classroom so I can make money to afford my debts…and right now, I can’t afford them. Every month is so painful. Even the $13,000 in credit card debt goes nowhere when I’m making minimum payments.
Should I just let it all go and default on everything? I feel like I’m throwing away money every month and that I’m just about to default on my private loan anyway. It’s as if I’m just giving them money to delay the inevitable.
Victoria
Answer:
Dear Victoria,
The drowning situation you describe is often common following a divorce. Taking a dual income household and converting it into two single income households can make it impossible for either partner to make ends meet. I would not be surprised if this was a contributing factor to your credit card debt.
When it comes to the federal student loans it sure sounds like those should be consolidated, put in an income driven repayment plan with payments as low as $0 a month, and then once you make 120 payments under that approach, your federal student loan debt could be forgiven tax-free under the Public Service Loan Forgiveness program. But now that you are not a teacher, any payment you make now would not count towards the forgiveness. You would either need to go back to teaching or make sure you work for a nonprofit hospital or some other public service nursing job.
[documentcloud url=”http://www.documentcloud.org/documents/2951767-Public-Service-Loan-Forgiveness.html” sidebar=false text=false]
This huge benefit of eliminating your debt does not exist for private student loans. If your ex-husband co-signed for the loans, when or if you don’t pay the lender will go after him for full repayment of the debt and it will tank his credit. As a co-signer he has 100 percent liability for those loans regardless what it says in any separate divorce agreement you came to.
So I would certainly get the federal loans consolidated and on an income based repayment program, Click here. There is no charge to do this.
“Once you sign in to StudentLoans.gov, you will be able to electronically complete the Federal Direct Consolidation Loan Application and Promissory Note. The electronic application on StudentLoans.gov consists of the following five steps:
1. Choose Loans & Servicer
2. Repayment Plan Selection
3. Terms & Conditions
4. Borrower & Reference Information
5. Review & Sign”
As far as the private loans go, as long as they are forbearance they are building interest. Not doing anything with those loans only builds the balances which might later land on your ex-husband.
As difficult as it is, you might want to have a conversation with him and see if he could assist you with the private student loan payment at this time.
Alternatively, you could always elect to go back to teaching in a non-profit or public school and get credit to forgive your federal student loans which you make enough money to make your private student loan payment.
I wonder if you are pursuing nursing because you are passionate about taking care of sick people and working crappy hours or if you might be more emotionally invested in teaching and that fills a greater joy in you.
Regarding your credit card and other debt you might have outside of the student loans, if you can’t make ends meet then you should contemplate filing a consumer bankruptcy to discharge the unsecured debt and allow you to get back to making the private student loan payment.
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