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My Student Loans Take Half My Income. Help.

03/17/2014 04:56 pm ET | Updated May 17, 2014

Dear Steve,

Currently I an roughly $80k in student debt that I have been paying on for almost 4 years. 48k is in private Sallie Mae loans, 19k in Federal Loans, and about 7.5k in a Parent Plus loan I pay on. I initially went on the graduated repayment plan, and now the payments collectively have ballooned back to roughly $875 per month, which right now is well over half of my my monthly net income. I also face the daunting task over the variable monthly interest of my private loans which vary from 8-10.25% interest variable monthly.

Having this much debt has crippled me in my professional life. I cannot get a loan for a car, home, or business despite a good credit rating of over 730. Of the almost $900 per month paid on the loans, almost 80-90% is going to interest. I want to do the responsible thing and pay off what I owe, but I cannot figure out a way to start getting ahead of it since I am already pouring almost all that I can into them per month. At this point I can never even imagine a reality of owning a home or business until these loans are paid off, which is still at least 10 years away. Is there anything I can do to make a solid impact on my debt, and start reversing the cycle?

Beau

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Dear Beau,

I hear you. Your situation is life-crushing but common among the people who contact me for help. When student loan debt begins to crush your life and rob you of the ability to save for retirement, action needs to be taken.

What strikes me in general about your situation is the federal loans should be wisely consolidated in an Income Based Repayment program and an Income Contingent Repayment program for the PLUS loan. Those will give you the lowest payments available right now.

The Sallie Mae loans need to be looked at by someone who specializes in this sort of thing, like these folks. Sallie Mae loans are odd beasts. Some are eligible for federal programs, others are not, and some others can be easily discharged in bankruptcy. As an example, check this article.

I would suggest you click here for more info on how to identify if your loans might be eligible.

What I see is Sallie Mae typically tries to sell a $150 deferment or forbearance option which seems like it rarely resolves the problem. It just helps to grow the balance and magnify the problem.

The final option to consider if you can't pay truly private Sallie Mae loans is to stop. In some situations that makes sense even though there are consequences like getting sued. But more and more people seems to be settling this debt as well.

The hardest part of your situation is going to be making sure you connect with a knowledgeable professional and not one of the many scam student loan assistance companies.

Steve

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