Seeking resources re: decades-long student loan despair.
October 30, 2014 7:15 PM   Subscribe

I currently pay one full week's pay each month, $600, toward my current student loan balance of $97,000+. Though I usually just pay it and try to move on, I know it will follow me to my death and if I can't be rid of it I hope some of you can provide some kind of advice or coping strategies. I have read through a fair number of related questions.

I am a mid-40s female, legally single (I think? 6 years living with a fellow, in Illinois), no kids. I make about $45k as an office manager and have had this job for almost 5 years (started at $32k).

It is my SO's house. I don't pay rent but I pay a share of expenses. He makes good money as a programmer and pays the majority of upkeep on the house. No plans to marry, but even moreso to be sure he doesn't somehow become liable for this debt.

In 1992, I got a BA. In 2006(ish), I got an MA (Creative Writing - pretty useless). Suffice it to say I took out some loans as an undergrad, then lots more as a grad student. Through these years and beyond, I had many years of crappy temp/low wage jobs, and not doing much of anything about these loans because I couldn't. I never went into default, mostly through forbearance.

Today I have a balance of over $97,000 in student loan debt - through Sallie Mae though just recently I began paying to a new thing called Navient. My loans are in two chunks, with a fixed rate of 5.38%.

I have to look into it further, but it looks like my payments just went to $1,000 per month. The $600 I currently pay is one full week's take home pay. Right around 25% of my take home income. It's like being an indentured servant. It's like one fourth of all my working hours are to pay into this black hole that I have no illusions will get paid off or even shrink really, in my lifetime. I thought the $600 was covering new interest, but if so, it was barely so. I also believe the $600 was offered as income-sensitive repayment with some understanding that amount would go up.

Do I have any options at all, of getting out from under this? I believe there's a thing where if I pay on time for 20 years straight the rest will be forgiven? But in the last five years (paying $500/month for some of it, and $600/month the past year or so), I have had to skip 1-2 months per year due to medical or other bills, so I don't even know if that 20 years starts over every time that happens. I don't know if I get credit toward that 20 years if my payments are considered income sensitive.

Can someone point me to some resources? Should I find a lawyer and what could they even do? Or maybe you have an anecdote about living with debt, some way you manage to get through the day knowing you will never be able to build much of a savings or any kind of retirement. (I do put in a very, very modest amount to the company simple IRA plan, but not even the 3% that the company would match. I don't even know if these kinds of plans are worthwhile anymore, or if that's just another black hole.)

I suspect some of you have little to no sympathy, as I was a grownup when I took these loans. Maybe you think since I make a decent wage with relatively few expenses, I should suck it up, live like a frugal monk and just pay it. The trouble is, that's still probably 10+ years of living a seriously frugal existence while working a job that has in the past year become much more stressful than it used to be.

All ideas or coping strategies welcome. Apologies for length.
posted by anonymous to Work & Money (19 answers total) 7 users marked this as a favorite
Do I have any options at all, of getting out from under this?

Yes. You can pay off your loan. It was, after all, paid for by the general public, so if you don't pay it off, everyone else will instead.

I believe there's a thing where if I pay on time for 20 years straight the rest will be forgiven?

The term you are looking for is Income-Based Repayment, which will reduce your payment to some percentage of your income (generally 15% of your income, but that is highly variable depending on your circumstances) and then forgive the excess after some period. For existing loans like yours, it's likely to be 25 years. It's important to note this currently this only covers federally-insured loans and that any forgiven balance will be considered taxable income. Of course, these programs may change over the next few years.

Should I find a lawyer and what could they even do?

Not much. It is quite hard to discharge student debt, even in bankruptcy.
posted by saeculorum at 7:20 PM on October 30, 2014 [6 favorites]

Yes, look into whether you qualify for any of the income-driven repayment plans--there are a whole bunch and I'm not sure if all outstanding federal student loans qualify, but I think they do. The ending amount, like all forgiven debt, is only taxable if you would have had assets with which to pay it, so if you don't have a lot of assets when it comes due, it won't be a big deal--but if you end up buying a house or something, you should be aware that it's coming.
posted by Sequence at 7:27 PM on October 30, 2014 [1 favorite]

Loan companies want you to pay off your loans, so if you call them, they will work with you to find a way to pay them off, however slowly that is going to be. So just call them and figure out a repayment plan that is going to work for you. Quite frankly, 1/4 of your take home pay when it sounds like you have very little other expenses doesn't sound like much to me. Perhaps if you provided more info on your other expenses, that would be helpful to other mefites.

FWIW, I think the 20 year forgiveness thing is on new debt, you are probably not eligible.
posted by echo0720 at 7:47 PM on October 30, 2014

At $1000 a month and 5.38% a year your loans will be paid off in just over 10 years.
posted by MattD at 8:09 PM on October 30, 2014 [12 favorites]

See if they're willing to put you on an extended repayment plan. I was able to do this through Sallie Mae. Yes, you pay more in the long run, but having the extra take-home money to live modestly is completely worth it. Now, as my income is increasing and debt in general is decreasing (I've paid off some of the smaller Stafford loans already), I have more luxury to pay extra payments here and there.

The extended repayment plan goes out to 20 or 25 years I believe, but you'll have to check with them to be sure. Good luck.
posted by Verdandi at 8:18 PM on October 30, 2014

I have to look into it further, but it looks like my payments just went to $1,000 per month

Definitely look into this. As noted, this would have your loans paid off relatively quickly (much more so than the graduated repayment options). My experience with student loans was that they were actively unhelpful and were extremely hard to get information from, so be prepared to dig and push.
posted by Dip Flash at 8:27 PM on October 30, 2014

One thing that feels really demoralizing about loan repayment is that early on, a really high percentage of your payment goes to interest instead of the principal, so it looks like your balance is barely going down and it feels like it will take FOREVER to pay off. But if you keep plugging away at it, those numbers swing, and eventually the bulk of your payments will go towards principal, and your balance will be more obviously shrinking. There will come a tipping point where you will start to feel like you are making progress on the loan. If you can manage to make some extra payments in the early years of loan repayment, this will all come about even faster.

Honestly, though, if this is your only major expense, since you have free rent, it sounds like you are in a very good position, and I would hardly call that living like a frugal monk.
posted by ktkt at 11:56 PM on October 30, 2014 [2 favorites]

Consider seeing a tax advisor. You might be able to use your interest payments to pay less in taxes and get more take home pay. You can reduce your taxable income by up to $2500 without having to itemize your deductions due to your educational interest payments. I don't understand how you can make $45000 a year and only take home $600 a week.

Also check out Reddit's personal finance sub reddit. They can be very helpful. Good luck!

Also check out
posted by GregorWill at 2:52 AM on October 31, 2014 [2 favorites]

Something doesn't sound quite right. I have income-based payments on my student loans, and although the principal is less than yours, my income is quite a bit higher. I pay a little under $600 a month. You need to contact your lender asap and make sure you're on income-based repayments.

Don't just look at the lender's website. Call them on the phone; be firm or even mean. It's OK to share your views with them that this is akin to indentured servitude.
posted by mibo at 3:39 AM on October 31, 2014 [1 favorite]

You are essentially paying a mortgage. Based on the income and expenses you've outlined, you could easily make extra principal payments each month (or in a lump sum once a year) and have this thing paid off in well under 10 years. It might feel a little like frugal living for a while, but getting out from under debt feels so much better.
posted by vignettist at 5:14 AM on October 31, 2014

There's a lot of information on the personal finance subreddit on Reddit. Check out the wiki on the sidebar too for more student loan specific info.
posted by futureisunwritten at 5:23 AM on October 31, 2014

One step that might help reduce the stress of these loans would be for you to really understand the amortization schedule of your loan repayment. Right now it feels like it will take forever, but it won't actually take forever. You should be able to get a simple spreadsheet that shows how much principal and interest you are paying each month, how much the amount you owe goes down each month, and when your loans will be fully repaid (yay!).

Seeing the amortization schedule will also help you choose between repayment options. It will help you decide whether it is worth it to pay more each month in order to get the loan repaid sooner.

But mostly, it will help you feel less out of control.
posted by alms at 6:35 AM on October 31, 2014

Mod note: From the OP:
OP here. First, an apology for some poorly chosen phrasing used in the above - it was written in some haste at work and upon learning I may have a $1,000 bill every month for another decade or two. I lived paycheck to paycheck for so long that now that I'm finally doing better (and working hard to earn it), it feels like I am being kicked right back to that position. [For minor clarification about take home pay, about $60/week goes toward health insurance.]

As an added bonus, I did not live on many of these loans alone, but much with a former boyfriend who is probably debt free right now. That, along with the fact that the amount I owe at this point is higher than what I actually borrowed. (The earliest loans were at 7-9% for some years, and many years of payments were minimal and sporadic due to low wage jobs.)

I realize compared to most people (even in the U.S.) I am operating from a position of privilege. That may be true, but doesn't change the fact that it can still be terribly depressing. Thanks to all for the advice. I will definitely investigate what my actual interest to principle breakdown looks like.
posted by mathowie (staff) at 7:10 AM on October 31, 2014

Every $100 per month will reduce the payoff by approximately one year. It's probably better to skip the retirement savings for now and get the debt paid down, especially if you regularly find yourself at the point of delaying payments. Lots of people end up with lots of student loan debt and not even a degree, so you are better off than them, by far. Especially with someone who is paying the rent. Sorry you're in this position, though.
posted by wnissen at 7:38 AM on October 31, 2014

Are these loans federal or private? Sallie Mae/Navient services both federal and private loans. Your options will depend on what type of loans you have.

What year(s) did you take out the loans? If federal loans, the year you took out the loan will help determine which payment plans you are eligible for. The old ones will likely have fewer options than the newer ones.

Try out to help visualize your payoff.

Don't worry about the moral component here. Yeah, yeah, you signed the papers, blah blah. Whatever. If you borrowed 100K on credit cards (by, say, going to dinner at Eleven Madison Park every week for two years), you could (in many cases) declare bankruptcy and start fresh, you can't do that (absent very unusual circumstances) for student loans. Our system is messed up.

You're somewhere in between the popular saying, "if you owe the bank $100 it's your problem; if you owe the bank $1 million, it's the bank's problem." You have two choices: decide you're going to pay them, or decide you're not going to pay them.

If they're federal loans, you should work on staying current. There are many many payment plans that can help you, and federal loans have much more aggressive collection options (including garnishing social security). If they're private loans, you could consider defaulting. If you want to buy anything big (house, car, etc) on credit in the next 10 years, then this is not a good idea. If you're ok with being a cash-based person, dodging creditors, and not having assets in your name (some retirement accounts are protected), then maybe this is worthwhile for you. They can garnish income and seize assets, but like many things, if you're smart, you can minimize the impact of this. If you're sacrificing saving for retirement, then default may be a good financial decision, even in the case of federal loans. You'd want to talk to a debt collection/bankruptcy attorney in your jurisdiction to properly plan this, but you can google "strategic default" for more initial information. Again, this is harder to do for federal, but not impossible.

Here's a good story from Above the Law about life after default.

Whatever you do, it's important, mentally, to remember that you're in charge of your life here, not the lender. You can choose to pay them or choose not to pay them. There are consequences to your actions, of course, but they aren't life or death.
posted by melissasaurus at 7:56 AM on October 31, 2014 [6 favorites]

Your first step should be to make a budget and see where your money is currently going. You may find that a lot of the expenses can be reduced. I think that feeling more in control of your spending and having a better sense of where your money currently goes may improve your mental state regarding this debt. If you would like advice on how to handle your budget, feel free to memail me, or check out online forums like Mr. Money Moustache that do this.

My husband, two kids, and I spent several years living on $20K total, and we had to pay a mortgage. I'm not saying this to make you feel bad, but to make you realize that living on less doesn't necessarily have to make your life miserable. I wonder if your wealthier partner makes it harder because he has more disposable income and you want to join him in his lifestyle. That's something else to work through in your own head or with him.
posted by metasarah at 11:33 AM on October 31, 2014 [1 favorite]

I know it sucks. You took on an absolute shitload of debt, and I'm guessing nobody who had anything to do with loaning you that money ever really sat you down and said, "You know, it looks like you're going to wind up with $x in loans, which is going to cost you $y, which breaks down to $z/month for n months. How are you going to manage with those payments?" And I know that probably most of the people involved really believe that they're helping the world out by providing these educational opportunities and etc. But the end result is this, people trapped by their debt.

Every chance you get, pay extra. Even if you pay $1100/month you'll cut 6 months off your repayment period. With every payment you make, keep reminding yourself why you're paying this (because you agreed to pay it back, because the person you were had no real concept of what $600/month for 20 years really meant) and keep it in mind when you vote and when you talk to your friends' children who are getting ready for college. Maybe the best thing that comes out of this is some kid looks at your situation and says, "Huh, maybe I should hold off on paying for school until I really grok the situation."
posted by disconnect at 1:08 PM on October 31, 2014

One thing that helps me is a paraphrase of Steve Earle talking about his record company advances: "If I die in debt to them, that means I won." Makes it easier to not worry so much about never paying it off — fuck it, they gave you the money and once you're dead, they can't get it from you.

(Oh, and fuck the moral sentiment about not abandoning debts. Corporations will break a contract if that contract's unprofitable for 'em. You don't owe them any moral debt, just money.)
posted by klangklangston at 1:51 PM on October 31, 2014 [5 favorites]

You will feel better if you know what you are achieving when you pay extra on your loan. The Debt Reduction Calculator by Vertex42 on google docs is excellent. It shows you when your loan will be done, how much interest you will pay and you can play with the amounts you pay and which debts you prioritize.

What I did was create a doc with worst case interest costs and debt clearance dates. Then I set it so I was paying a lot extra each month, using the snowball method, and saw how many thousands of dollars it would save to pay early and how quickly I could get out of debt. I now know that in under 2 years I will have 2 grand more cash per month and I will have saved myself about 8 grand in interest I would have paid if I stayed on minimum payments.

Because of this spreadsheet I also know the true cost of any current spending (because I can add the purchase amount to the spreadsheet and see how much it adds in interest payments over the life of my debt). It is pretty sobering to learn that $1 spent today can actually be about $2 in reality over the life of your debt. When I feel impoverished I look at the amount I would have paid and how much longer my debt would have ran for and it feels good to pay debts down early.

I wish I had done this 10 years ago but I was too overwhelmed and too scared to face up to it.

A staggering number of people are living beyond their means and are buried in debt. You are not alone. You also need to keep in mind that the Joneses you may want to keep up with may be like Wile E. Coyote running on air. There is something like a 1 in 5 chance their home is underwater. The average US household has about 8K in credit card debt. Total household debt is currently running around 110% of disposable income.

Make getting out of your debt you second job and one of your major goals.
posted by srboisvert at 5:47 PM on November 1, 2014 [4 favorites]

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