Dear Steve,
I'm a mechanical engineer of 8yrs, went to private engineering school, had to borrow full tuition/room/board for 4yrs. Racked up about $160k in PRIVATE loans (dad made too much to qualify for any federal $).
Married my wife and fellow classmate in 2010. She also racked up about $140k, *mostly* private, but some federal loans.
Predatory lending was in full swing when we started school in 2003 and 2004. Tuition went up about 10% per year, and (thank gosh!) lenders were quick to assure students we could borrow however much we needed. What was I going to do, uproot my entire education for a 10% tuition hike? That old adage of "just borrow whatever you need to get a good education, and you'll just pay it off for a while but you'll be fine!" rang out, from loan officers to financial aid consultants at the school, to our parents and even guidance counselors.
Together, we have well over $200k in student debt, the vast majority of which is private. I make about $80k/yr, and she is finishing grad school.
We have been living hand-to-mouth for 8yrs, since we first met, and there is no end in sight unless our income triples. I got a good job right after graduation, and (despite what the loan officers and "guidance counselors" told us), I've been one paycheck from being homeless since my first paycheck. We make our loan payments on time, but the sheer volume of principle is overwhelming.
What can I do to stop living paycheck to paycheck, when my wife and I owe over $200k in low-interest private student loans?
Consolidating our loans would raise my interest rates, so it's not worth consolidating mine with hers. I can't consolidate any of mine among themselves, because they're all private from three different lenders. We don't qualify for any of the federal relief programs, because our loans are private. I've been paying interest-only for years on my Sallie loan...principle amount borrowed in 2006: ~$75k. Current payoff amount: $71k. 7yrs of bank-breaking payments, and $4000 principle paid off. We are being bled dry, and the only relief they offer is "interest only" which, as you know better than I, is a losing, uphill battle.
We are so sick and tired of living paycheck to paycheck for 8yrs now, as two well-educated young adults making good money. We've been renting (of course), because our debt:income makes qualifying for a decent home loan laughably out of the question.
Should we just stop hoping for some relief, and accept that we will be relegated to living paycheck to paycheck until we retire in 30yrs, not being able to own a home, not being able to adopt a child, etc?
Thank you.
Chris
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Dear Chris,
I hear you loud and clear. As you've observed there was a giant disconnect between the promise of easy money to go to college and the reality of paying it back. A more painful fact is the vast majority of people that owe student loans never got the benefit of the degree as you have.
Currently there are no good options for dealing with private student loans. You've already looked into consolidating and as you found out the interest rate is higher than what you are currently paying so that's out of the question.
The Consumer Financial Protection Bureau (CFPB) has been looking into the troubles with private student loans but I have not seen anything on the horizon that would indicate new repayment plans are coming.
Hands down if student loans are owed the best ones to owe are federal government backed loans. At least there you have some income based options on repaying your debt.
One of the stranger things I've seen are loans serviced by Sallie Mae which are really eligible for federal relief programs. The best way I've found to tell if any of your Sallie Mae loans may be eligible is to see if they are listed in the National Student Loan Data System (NSLDS). You can find information here on that database and other options.
Some people have received offers to settle their Sallie Mae student loan debt for less than they owe. From what I've observed Sallie Mae sends out these offers when loans meet some internal configuration and there does not appear to be much someone can do proactively ask for a settlement. But in your case $100,000 settlement might be out of the question as well since you could not afford that.
So now we are down to the logical solutions. The first would be to increase income if possible. I know it's obvious but I had to say it.
The second would be to make room in your budget if possible by eliminating your other debt to make the student loans payments easier. You can click here to find a local bankruptcy attorney to discuss this with.
A much more controversial approach is to default on the loans, wait to be sued and then attempt to negotiate a suitable repayment plan as part of the mediation with the suit. Or even to find a bankruptcy attorney that would include the student loans in an adversary proceeding with your bankruptcy. No matter what you've heard, even private student loans can be discharged sometimes in bankruptcy. Don't believe me, read this.
The unlikely outlier solution in your case is that your school was not accredited at the time you attended. In that case the private loans would be almost instantly eliminated in bankruptcy.
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