Get Out of Debt Guy - Steve Rhode

How Can My Family Crawl Out from Under Crushing Private Student Loan Debt?

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Question:

Dear Steve,

My two children graduated from college. One attended Pace University and one Fordham University. They both work and pay their student loans to Navient formerly Sallie Mae on time. I have a Parent Plus loan from Navient. Between all of us we have about $250,000 in student loan debt. My husband and I are constantly thinking of ways to relieve this burden from all of us. It seems hopeless. Most of the loans are private and have 8% interest.

Both of my children want to make a career change since they are not making enough to live. My daughter wants to go to nursing school. What do you suggest to us? I would appreciate any advice. Right now, all of us are working and giving all our money to these loans. Loan forgiveness? What can we do to get rid of this debt more quickly?

Diane

Answer:

Dear Diane,

Unfortunately, the day people take out private student loans, the future has been decided. Private student loan lenders do not have to make any affordable payment arrangements, do not have to offer any forgiveness, and often ask for co-signers.

The good news here is the Parent PLUS loan can be consolidated and put into an income contingent repayment plan if your income is not all that wonderful. You can use this online calculator to see what your payment would be.

I have long had an issue with all schools that facilitate kids into private student loans without much explanation that your field of study and income have to play a role in deciding how much private student loan debt you can afford. Schools and lenders do little to no screening and pass out loans like crack.

The obvious way to get rid of the debt quickly would be to pay it off in full. I know, I just felt compelled to state the obvious.

If you are not a co-signer on the private student loans then the kids could think of a more drastic step, strategic default. Read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.

It is a strategy with consequences but it is a valid strategy in situations where there is no other way out.

If the kids went this route, they would still be able to qualify for federal student loans, but doubtful any private lender would touch them following default.

If your daughter had federal student loans and not private, she could probably get on a $0 a month income plan while in nursing school and possibly be eligible for total loan forgiveness after 120 months of income based payment through the Public Service Loan Forgiveness program if she went to work in many of the healthcare opportunities that qualify.

The bottom line is there is no painless way to break this cycle. The die has been cast for many and their futures ruined the day they attended their first class using a lot of borrowed money.

But I don’t want to get you horribly depressed. I’m just saying the options that are available won’t come without some pain.

If you wanted to talk to someone who is very knowledgeable in the entire strategic default process, talk to my friend Damon Day.


Big Hug!
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