Overwhelming Student Loan Debt

Hi, This is my first time on the site and it's encouraging to hear that I am not alone and that debt can be managed. I have been in panic mode for about a week when I found out that my monthly payments on my student loans would be $1700. My husband and I have a high income but we are also both admittedly terrible with money. We have about $30k in credit card debt as well.  I haven't been able to sleep contemplating how we will ever manage to take on this monthly payment. I have considered getting another job, I have considered what would happen to my credit if I don't make the full payment each month, I have considered suicide. I know suicide isn't the answer - I can't leave my husband to deal with this and we have three beautiful kids that need their mother. It's just so overwhelming. I am wondering if the education was even worth it if it wrecked our lives. I guess it doesn't matter at this point. Any suggestions on where to start?  

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  • Hello! First of all, you're not alone. Lots of us have been in your shoes, and some of us still are :)

    We have two kids (2 and 7) and a staggering amount of student loan debt (around 200K), from both a grad degree and a law degree.  When DH graduated and I finally looked at those loans, I had similar moments of outright panic. The good news is that, with a high income, YOU CAN DO IT. It's amazing how quickly debt disappears when you're really committed to it, and how rich your life can be. 

    Assuming that your student loans are federal, your first task is to work with your loan provider to make your payments manageable while you pay off the credit card debt. Then, you can tackle the loan debt:

    1. IBR. I assume you've already done this, but if you haven't, sign up right away for an IBR plan. 

    2. If you already have signed up for IBR (or another similar program) and your payments are still that high, consider filing separately. Our taxes are a bit higher because we lose some deductions, but the monthly loan payments shrink from nearly $2500 to around $500 a month. 

    3. Reduce your income as much as possible through pre-tax contributions. You keep more of your money and it lowers your IBR payments. 

    4. Use the breathing room in your budget to decide on your own how much money you can afford to throw at the loans.

    Here's a quick examples of what we do, using nice round numbers:

    Post tax and deductions, we bring home around 10,000 a month. 

    • $2000 goes to mortgage and escrow
    • $2500 goes to groceries, utilities, insurance, childcare, transportation, phone, etc
    • $1000 goes to savings goals (RDFs, IRA, 529s)
    • $1000 vanishes regularly every month to things like clothes, travels, guitar lessons, entertainment, etc
    • $500 is our regular student loan payment
    • ... and the rest of it, between 2K and 3K depending on the month, is our snowball payment to loans. 

    The debt isn't going to disappear overnight, but, for us, the education has proven mostly worth it. We do live more frugally than most people at our income level and consequently most of the people we socialize with. Who cares? I'm perfectly happy to drive a paid-off Honda instead of an Audi, and my favorite shirt is a striped Boden top that I got from a thrift store for $2.99. When I look at those numbers above, I'm actually a little ashamed by how much we spend.

    As for being "bad" with money--what I can tell you is that, for nearly two decades of my life I was "bad" with money too. And then I found YNAB :)

    I'm happy to talk to you more privately if you want. We have years to go still on this debt repayment journey!

    Like 7
    • firstmute  Thank you so much for your reply! I love all of your ideas! I am not on an IBR, but I am going to change that fast. I can handle losing a bit of our tax returns by filing separately if it means lowering the payment by that much. Your numbers look very similar to ours, so it makes me feel so much better that you are able to do this and actually live. I had visions of Ramen noodles for every meal and having to tell the children no to everything. I was able to get a year of forbearance....my thought was that in a year I would have more clients and, thus, more income. If I can pay off my credit cards during this year (it will be tight but I think it can be done), then I can handle the loan payment. It's just overwhelming to see such staggering numbers and the interest that accrues on these numbers. Thank you for helping to ease my anxiety - you just can't imagine how much that means to me.  

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      • firstmute
      • mom, wife, and professional nerd
      • firstmute
      • 4 yrs ago
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      Law School Debt I'm so happy I could help a little. The thing is that you do have to say no sometimes (even most times), both to your kids and to yourself, but--again--YOU CAN DO IT, and you can still live comfortably and even relatively luxuriously.

      My 7 year old *has* started to notice that our house is smaller than many of her friends', that we don't eat out, that we don't travel as much. It honestly doesn't seem to bother her--and even if it did, well, that's life sometimes. I've explained to her that families value different things, and we value paying back the money we've borrowed and making sure we have plenty of money saved for the future. If she wants to use her money to travel when she's older, that's a choice she can make. 

      I do have two specific pieces of advice about saying no. (Normally I would try to restrain myself from giving so much advice but I'm identifying really strongly with you right now and I hope you find it helpful and not intrusive.)

      1. It's hugely helpful to read about frugal living and financial independence. I'm not at all interested in going as extreme as many of the big voices in the field, but it's a question of comparison: if I spent all my time reading design and travel blogs, I'd start to think I should be spending all my money on consumer goods and international travel. If I read frugal blogs, I remember that it's perfectly fine to camp and shop at thrift stores.

      2. I cultivate a feeling of superiority. Hear me out! When a mom drops her kid off at my house in the aforementioned Audi, I think to myself "Gosh, I'm sure glad I'm not dumb enough to trade away my life for a nice car". Or "Only an idiot would drop $100 a month on a massage when they're drowning in credit card debt."

      Are either of these things true? I have no idea! Maybe the mom with the Audi has a paid-off house and $2 million in index funds. (The specific mom is a doctor married to a doctor, so actually the chances are quite high lol.) But it firms my resolve and makes me feel confident in my life choices :)

      Like 3
    • firstmute  Your advice is definitely helpful, and not intrusive at all.  It is very much appreciated. I agree with your thoughts here on saying no. My daughter attends a very expensive private school (only because I can send her for free due to the fact that I work there). She has illusions of keeping up with the kids here but our budget simply doesn't allow it. I grew up modestly and I survived so she will too.  :)

      I am new to the frugal lifestyle but I am very willing to embrace it! I have just started reading up on ways to save money, cut my budget, save, etc. Any advice you have on what or who to read would be greatly appreciated. 

      I think that part of my anxiety is because I feel so guilty for putting my husband in this tough spot with me. He was so supportive to me all through law school and I thank him by putting this huge burden on us. I can only work part time in law until my daughter graduates high school because, like I mentioned, her tuition is free while I stay working at the school. So, hopefully, I can build my practice enough on the side so that I can bring in extra money. 

      Instead of feeling hopeless like I did earlier, I now feel energized and ready to take on this task. THANK YOU!

      Like 1
  • With regards to your daughter, have you done the math?  Let's say your daughter's private school tuition is $30,000.  With luck, practicing law as a solo practitioner on a part-time basis MIGHT get you around $50,000 and that's probably your best case scenario.  On the other hand, working full time for a law firm will bring a salary+bonus to at least $150k, maybe more. You might not start off with that, but I don't know any associate around who starts off with less than an $80+ base (more in big cities).  And each year, that will grow.  So my point is that you should be able to finance your daughter's education and earn a lot more than if you are working part time, even factoring in the free tuition.

    I'm an attorney (non-trad student) and have seen a lot of my classmates go the route you are taking .  The problem is that when you take a smaller role in the beginning of your career as an attorney, it's harder to pick that up once you are ready to go to full time.  It's not impossible, but it is more difficult.  

    You also might want to check with firms that seem more creative (family law firms are good about this) to see if you can work there part-time with the understanding that it will graduate to full time later on.  There are a couple of attorneys at my that do this, and I know of others as well.

    I realize I did not factor in your current salary, but again, the stress of practicing law part-time, plus working a full time job can be very difficult.  

    • Whereforart Thank you for your reply! I have thought about switching into law immediately and trying to pay her tuition from my (hopefully) increased salary. Unfortunately, in the area in which I live, I would have to travel 2 hours into work each morning (and home) to work a job at a big firm that would pay even close to $100k/year. And, even though I graduated close to the top of my class, I didn't go to Harvard and, thus, jobs are scarce. I am working part time now with an attorney who is my mentor, and I am trying to find creative ways to network and bring in clients. He bills me out at a rate commensurate with an associate when I work on his cases and I get to bill what I want when I bring in my own clients. The idea is that when I have built enough of a client base, I will be a solo-practitioner who shares the same office space as he does and eventually leave my current job.

      I definitely hear what you are saying about starting in a smaller role and trying to transition to a bigger one later on. This worries me and I have thought about just taking on that long commute and heading into the city to do 100+ work weeks and pretty much live at the office but after 4 years of law school (also non-trad student) and working full time during law school, I feel like I owe my family for all the times I was too busy studying or spending time on law review.  The kids have said that they have a hard time remembering what "before law school" was like. So, even though the debt situation is awful, I have to carefully weigh priorities. 

      Like 2
      • Whereforart
      • Mostly traveled.
      • whereforart
      • 4 yrs ago
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      Law School Debt I totally understand about priorities. I will say that not every associate works 100+ work weeks and lives at the office. I am a partner with a firm that has around 22 attorneys and in general, they bill around 1800 to 1900 hours a year - and there are many other firms like that. By the way, I had never heard of IBR until this thread - I was lucky enough to be able to consolidate $90k of student loan debt into a 3.25% interest loan. So it's a 30 year loan but the payments are a little under $425 each month. By the way, while I was looking up IBR, I found this site that explains some of the student loan payment options - it looks like good advice. https://www.nerdwallet.com/blog/loans/student-loans/what-is-income-based-repayment

      Good luck with whatever you decide, regardless!  

      Like 1
      • starlady09
      • starlady09
      • 4 yrs ago
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      Law School Debt Hi! I'm a single mom law school graduate (NOT lawyer) and I'm on an IBR repayment plan. As far as the above advice - there are other options that do not include 100+ hour workweeks! You don't say whether you are working part time at the school (is that an option?), but you can probably find a smaller firm in your local area where you can start part time (do you work at the school in summer?) and then move up to full time when  you're ready or you can gain experience so that you can find a full time job in your area in a few years. The options are not 1) work at huge firm with terrible hours and 2) work on a few clients here and there and hope it builds over time. There are probably solo or small firms in your area that need help.

      As for IBR - its income dependent. If you are working in public service, you can enroll in Public Service Loan Forgiveness (which I'm doing) and your loans can be forgiven after 10 years of payments. Congress hasn't killed it yet, so enroll sooner rather than later if you qualify. It is based on your AGI, so the lower your AGI the lower your payments. If your spouse has a high salary, you'll need to file separately.

      Like 2
    • Whereforart That is a great interest rate! I was able to get a year of forbearance and will try for an IBR when payments become due next February (and in the mean time, throw as much as I can to the interest this year). My husband and I will have to file separately as he makes more than double what I do so the payments would be high with us filing jointly. 

      Those hours also sound very do-able but I fear that the jobs are too scarce to obtain one that pays enough for me to leave the private school and take on the $36k/yr tuition. A law school friend of mine has been on several interviews, and the only job offers she has received have been for $30-40k per year. And we are in Massachusetts, where wages and cost of living tend to run high. 

      Luckily, the job at the private school is so easy and working part time at the law office allows me to do what I am passionate about so it never feels like work. I just need to focus on bringing in more and paying down the debt before I drown in it. 

    • starlady09 Thanks for your reply! There is comfort in knowing I am not the only one with these issues. Debt is not a typical conversation topic so it can feel very isolating, especially thinking you are the only one in the situation. I am currently working with a solo practitioner who is teaching me what I need to know to hang my own shingle, which is what I am slowly in the process of doing. I have a two-year business plan to start and I am working on a long-term business plan now. Working at the school part-time isn't an option, but the hours are great (8am-3pm) and we are only in session 165 days per year so I can dedicate all the other days to law.  Plus, I have flexibility to take a day here and there if I need to make a court appearance. 

      I need to get on an IBR when I start making payments, and maybe talk to someone about consolidating. And I will definitely have to file separately from my husband. I hope these things, plus cutting some expenses and paying down cc debt will allow us to keep our heads above water. Good luck to you as well! :)

    • Law School Debt  The one thing you'll want to look into is how much longer it will take to pay off the debt using IBR, and have a real conversation with your husband about that. If you're making smaller payments (and can't do PSLF), it will take longer to pay it off. That doesn't mean you shouldn't do IBR for a few years, and then switch to a standard repayment option - you can go back and forth fairly easily. Maybe get some advice from the relationships part of the forum for managing that - I'm single, so I make all my own decisions but in a marriage discussion/agreement about money is really important. Just remember that its never all or nothing - you can start out with high payments and then go to IBR, or you can start out with IBR and switch later. You can also agree as a family to downsize/cut other spending so that you free up money for debt payments.

      I'm doing PSLF, and am actually trying to pay as little on my loans as possible because most of it will be forgiven. It means that I'm playing games with my AGI (like contributing as much as possible to my 401k account and FSA's) to bring it down and keep my payments down. If I was planning to pay back my debt without PSLF, I would be doing things very differently. I also live in a high cost of living area (the DC metro), and have made choices based on what I can really afford, and not what my mortgage lender told me I could afford. Once my student loan debt is gone I might re-evaluate. Or I might not.

      I did consolidate my loans, but to a federal consolidated loan so that my loans still qualified for PSLF. I can't help you with that part of things, but before you sign anything do your homework. Make sure you know exactly what you're signing up for (federal loans have protections that some private lenders won't give you!) and be very aware that if it sounds to good to be true, it probably is.

    • starlady09 Very good to know that I would be able to switch back and forth relatively freely! I didn't think they would allow that. I would have done PSLF myself but I knew I wouldn't be able to leave my job until after my daughter graduates in 2019. I am hoping that the program isn't taken away before everyone who relied on it can get their loans forgiven. 

  • Please know you aren't alone. I also have high monthly payments ($1200) along with the credit card debt and I went to law school as well. I now owe more than I even borrowed - $150,000. And I graduated in 1999.

    It's hard to breathe. ..and even though I have a high income, too, the more I make my student loan payment just goes up proportionally --- so it's like I can't get ahead.  And then I make too much for the interest tax deduction.

    I was a public defender for 7years and THEN they instituted the loan forgiveness. But I couldn't continue on that for another 10 years....I was just too burnt out. Now, I find out I probably wouldn't have gotten the forgiveness I thought I would. 

    Anyway, I've been in and out of forbearance. I am on IBR, just make sure it isn't as much as if you pay straight out (mine isn't much lower).  My current loan servicer (EDF) is allowing me to forbear $700 but make payment I can afford (for now) of $500. I know in the long run this is just madness, but I can't afford to default. Does your loan service provider offer anything like this? 

    Or, is your credit good enough to refinance? I haven't gone this route yet because 1) my credit is terrible 2) I'm too scared to give up the forbearance option by selling to a private lender.

    • RebeccaB I have not asked my loan provider about forbearing a portion of my payment. I am just going through NelNet at the time. They don't seem very forthcoming about information though. I wasn't aware that if my husband and I file separately, the monthly payment is only based on my salary. I also didn't know that you could go into forbearance more than once. I am considering a refinance - my credit is good but I also wonder what a private lender's pitfalls would be. More than anything, I wish I really educated myself about this before jumping right in. I wish I had known how much the payments would be. That may have swayed me to just stay put and not go back to school. 

      Good luck! I hope you get some relief!

  • I hear you - and I curse the day I signed these loans and went to law school. First things first - find out what type of loans you have - government subsidized/unsubsidized, or private. I haven't heard of NelNet. 

    You can only forbear/defer and get Income-Based Repayment (loan forgiveness after 25 years of payments) on government loans.  You should still be able to refinance your loans back to the government - go to studentloans.gov and click on the repayment tab. You can refinance your loans with the gov. The benefit of staying with government serviced loans is that you CAN forbear IF you need to. 

    If you sell your loans to a private provider, like a bank, you can get a much better interest rate (my current rate is 8.5% yikes!). BUT you won't ever be able to forbear. So, if you lose your job, etc.......you risk default if you can't come up with the payments.

    Since I haven't been able to get my act together and get financially stable, I've stayed where I'm at. 

  • There are lots of factors to consider here and you've gotten some really good advice. I would second the advice about really considering whether the private school job is worth it. You're not only losing out on potential income now, you're losing out on future income based on raises, possible bonuses, retirement contributions, etc. 

    I know education is highly personal, and most people instinctively refuse to consider moving their kids. I do get that. I work in education and have Very Strong Feelings about what constitutes good education. 

    At the same time, I'm a pragmatist. We live in an area with decent, although not outstanding, public schools. Would my child's education really be twenty-six thousand dollars a year better at the private school nearby? No. In some cases, it might--like if she were actually in physical danger, or if the school were so badly run that she couldn't pay attention in class--but in our case, absolutely, 100% not. In almost every case, a kid's home environment is more important than school. 

    All that's to say, you might want to consider carefully whether you might be losing out on more than you're gaining. 

    Also, I would stay away from refinancing government loans unless you end up with a much greater and more stable income within a few years. Government loans are forgiven after 25 years even if you're not in public service. You'll owe taxes on the forgiven amount, but it is, at least, an end date. You lose that, plus IBR, plus any forbearance if you refinance. 

    Like 1
    • firstmute I wholeheartedly agree that in most cases, public school is just as effective. I've always been a public school student. However, my daughter graduates in June of 2019 and she has been here for most of her school life. She would be crushed if I withdrew her at this late point so close to graduation. Plus, I have already promised that she would be able to finish school here as I didn't want my career change to negatively affect her (more than it already has).  So, I am relegated to this job at least until June of 2019. Although, when I talk to my mentor, he says that I will not make what I make here at the school until I have been practicing for years so I should try to keep this income for as long as possible. So that is something I have been considering as well. 

      I didn't know that about the government loans - that is very interesting and definitely makes me not want to refinance. I feel like I will need the IBR. What is the incentive for people to pay more than the IBR until the 25 years is up? Is it the tax penalty? I can't even imagine how high that would be.

    • Law School Debt It's not the tax penalty. It's that most people don't qualify for IBR for long enough to make it worth it. You can only use IBR until the Income Based payment is greater than the regular payment, and then you switch to the regular terms. Depending on how much money you borrowed, typically you qualify for IBR as long as your income is lower than your loan amount (so if you borrowed $50k, you'd only qualify for IBR until your income exceeded $50k - roughly, depending on whether you have dependents, and a few other factors). Most people don't make less than they borrowed for long enough to reduce their payments for that long.

    • starlady09 Ahhh, totally makes sense. Thanks for your explanation. I don't know what I would have done this week without this group - so many good ideas, so many explanations, and so much support! I have already done my budget and now I look forward to adjusting it based on reality over the next couple of months until we have something we can work with long term. 

      • firstmute
      • mom, wife, and professional nerd
      • firstmute
      • 4 yrs ago
      • Reported - view

      Law School Debt That makes sense--if you only have another year or so before your daughter graduates, then it definitely seems like you're doing the right thing!

      You had asked earlier for reading suggestions. The biggest name in debt reduction is Dave Ramsey. He's a bit of a polarizing figure both for his style (coach-y, folksy, religious) and his message (super intense debt reduction and savings), but many people have had their lives changed by him. I don't love his style, but I do like his message. 

      My favorite frugal bloggers are Mr Money Mustache and Frugalwoods. Again, polarizing--well, it's money, it's probably always going to be polarizing--but what I have found personally, like I said, is that reading about people who are way more extreme than I could ever be makes me feel like I'm living in absolute luxury comparatively :) 

  • If you go to the Dept. of Ed. student loan website, they have explanations of all the different repayment plans, how they work, and who qualifies. They also have a repayment estimator that you can use to figure out which is the right plan for you. https://studentaid.ed.gov/sa/repay-loans/understand/plans

    IBR may not be the right plan for you, but there are other options. My IBR payments would have been higher than the standard repayment, but the graduated plan dropped my payment about $250/month. It's probably not a great long term option; I think the current plan has me paying off the loans sometime after I'm dead. But it works for a few years while I save money for a house down payment, and the lower payment also means I have a lower debt-to-income ratio when qualifying for a loan.

    Still my payments are about 10% of my take-home pay. My interest is nearly 6%, but if I re-finance I'd lose all the benefits that come with the Federal programs like forbearance, if I ever need it, or even the graduated repayment.

    I also make too much money to get any interest deduction on my taxes. That's something to think about, too. If your income is lower, especially compared to your spouse, you might be better off filing separately, if you can get a break on the interest.

    Like 1
  • I could speak on this subject for a long time but one of the best pieces of advice I have is about consolidation. If you haven't refinanced yet, never, ever co-mingle private and federal loans. Federal loans can even garnish your social security should you get into dire financial straights but private loans can't do so. 

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