In this edition of the Student Loan Plan, we look at ways Jan and her husband can manage Jan’s mountain of student debt.  Jan fears the loans will never go away and that they will never be able to have kids.  If you want tips for dealing with your student loans, contact us.

Jan writes:

Hello,

I recently graduated with my BFA in Digital Art & Animation and have accumulated a lot of debt from school. When I was eighteen, I didn’t understand the concept of interest, and didn’t know if $1000 was a lot or a little. I was told to do well in school and to follow my dreams, and that’s what I did. I started out going to the Art Institute of Seattle for a year, and when I realized that they lied to me about making me hire-able, I transferred to DigiPen. A lot of the current amount is in interest.

My husband and I have been married for seven years and would really love to have children before we grow old. But we can’t even afford to feed ourselves right now. Wells Fargo refuses to negotiate. They want me to either make my payments in full, or default. And I can’t consolidate because I need a cosigner in order to do that, so my hands are tied. I don’t know what to do. With all this debt at the high interest rates (almost 14% for the Wells Fargo ones), I will never be able to afford children, a house, or a car. I wish I never would have gone to college. At least if I was working at a minimum wage job with no degree, I would be able to keep my paycheck. I don’t know what I’m supposed to do.

Current loan amounts with interest added:
$75,130.39 Wells Fargo Private Loan
$31,202.93 Sallie Mae Private Loan
$67,196.22 Great Lakes Government Loans

The Plan

Unfortunately there is only so much you can do with student debt, especially when lenders refuse to cut you any slack.  The most basic student loan plan is just three steps:

Step 1: Get the lowest payments you can on all of your loans

Step 2: Make the minimum payment on all of your loans except one

Step 3: Attack the one remaining loan with every penny you have, and once it is paid off, pick another to attack.

Even if you find yourself in a situation where the minimum payments do not seem affordable, find a way to get the lowest payment across the board.  If nothing else, it provides a good starting point.

For Jan, a call to her federal student loan servicer, Great Lakes, is an essential step.  Getting enrolled in an income driven repayment plan will help ensure that the government loans never take up the majority of her paycheck.  Great Lakes offers a decent explanation of the process.

While getting lower payments on the government loans can be a headache, the hard part is dealing with the private loans.

Unfortunately, the private lenders really have you boxed into a corner.  With student debt so difficult to discharge in bankruptcy, many lenders assume they will be able to collect sooner or later.  As a result negotiating is difficult.

Fortunately, there are some tactics that can prove to be successful.  For starters, lenders like Sallie Mae do offer a rate reduction program to help borrowers who have fallen behind.  Getting signed up can get payments lowered and help make sure more of your dollars go towards principal.

If your lender refuses to work with you at all, you can also file a complaint with the Consumer Financial Protection Bureau.  The CFPB is a part of the federal government tasked with keeping an eye out for the little guy.  These complaints are not always a solution, but it does force the lender to respond.  Filing a compliant could start the necessary dialogue.

Hopefully you are able to get payments low enough across the board so that you can start getting caught up.  If you are close, it might be worth calling your lender to let them know how close you are and what they would have to do in order to get you to start making payments.

As a final tip, when you are working with your private lenders, make sure that you are telling your story and explaining your situation to someone who can help.  Before you spend a bunch of time talking with a customer service representative, ask if they have the authority to lower your payments based upon your financial circumstances.  If they can’t, ask to be transferred.

Some Perspective

Hopefully Jan will be able to get her payments under control and start the long path to debt freedom.  Unfortunately, many families find themselves in similar situations, but unable to afford the payments.

The worst case scenario for huge piles of student debt may seem bleak, but there are some important things to keep in mind.  You can’t go to jail for failing to pay your student loans, and while a garnished paycheck and trashed credit score would suck, it is survivable.

Putting food on the table and a roof over your head is a bigger priority than paying down student debt.  Student loans can be a huge undertaking and while they may affect your lifestyle, they shouldn’t define you or your value to the world.