I Make Too Much Money to Repay My Student Loans

Question:

Dear Steve,

Great credit and can afford student loan payment, but I can only afford the interest only payment. Any options for a guy who wants to pay his student loans off, but hates how Sallie Mae, Navient, etc work?

Essentially I need a 0 percent 30 year loan and I could pay these things off.

I know I know I am the crazy guy that wants to pay my debt. I have an 800+ credit score that I am extremely proud of, a wife, 2 little girls and a new house that we built. I make roughly 6 figures but at the end of the day I cant really afford to pay more on my student loans and the first 5 years I have been paying interest only. (This makes me insane). Child care costs me $2500 per month, mortgage is $1400, and Student loans are $600 ($96,000 debt for undergrad and post grad combined). That leaves about $1000 left for all the other expenses, etc.

I have scoured the earth to find an option that will allow me to secure a loan in order to pay these loans off. Im at the point of looking for some sort of charity that loans money and allows you to pay back when you can or maybe an angel?

I find myself struggling to try to do a second mortgage to pay these off, because in some small space in my brain I think the government will figure out a way to correct it. BUT THERE IS JUST NOTHING OUT THERE FOR RESPONSIBLE PEOPLE! Everything is geared to the person not making enough money... I am not paying the loan down because I cant afford it, but I make too much money for them to do anything for me...

PLEASE HELP...

Nick

Answer:

Dear Nick,

This is a hot topic for sure. If you read what some people say in response to questions like this they will say you should downsize everything and repay all the loans as you agreed to. Check the comments from this post to see how some people feel.

So is your request unreasonable? I'm not sure about unreasonable, but it might be unrealistic.

It's not clear if you have private or federal student loans. If you have private student loans and you can't find anyone to give you an interest free loan as you desire, then your logical choices are to increase your income and/or reduce your expenses to all you to make the full student loan payment due.

Paying interest only is just going to drain money from your pocket without ever reducing your debt. That's not a sound longterm strategy.

Government programs are available for federal student loan holders and can be found here. But even those income based student loan programs come with consequences and can be a terrible trap. Don't believe me? Read this.

Ultimately, having a great credit score is not the ultimate goal in your situation. While you have a great score, you are apparently slowly drowning in your obligations and unable to dig yourself out. You are also unable to find any lender who will give you an interest free loan for 30 years.

What you are in search for sounds a lot like the Muslim approach of zakat to help those in need, interest free. Outside of that, I have never heard of any private student loan program that would fit what you are looking for.

But when it comes to federal loans, the Public Service Loan Forgiveness program comes very close to what you are looking for. Under that program, your federal student loans would be completely forgiven after ten years. You'd be halfway through.

I'm not sure if I can stand to look at what people are going to say about this in the comments below. It's going to be potentially brutal.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.