07/30/2015 02:41 pm ET Updated Dec 06, 2017

My Ph.D. Loans Will Leave Me Old, Broke, Hungry, and Cold


Dear Steve,

I have $175,000+in student loans from grad school programs. My first grad degree program was a PhD in political science; the second a high school teaching license in social studies. Neither field has been hiring over the past 15 years at anything other than a negligible rate. Because I have my masters degree, I am more expensive than other new teachers.

Of the 30+ students in my grad school programs, only 5 are employed in the field. Because of not finding employment in my field, I have spent the past 15 years working in retail and as an administrative assistant. The salaries in that field are substandard at best, so I have barely been able to make ends meet; even having to live with my parents over the past 10 years.

All that time, my student loans have either been in unemployment or economic hardship deferment. I have never made a payment because in those 15 years, I have never made enough to where the minimum payment (approx $1,000/mo nth) has well exceeded 20% of my gross income.

Currently, that would be 50% of my income. Recently, one set of my loans - I have tried to consolidate them over the years but my Navient loans and those through ACS cannot be combined for some reason - has gone into default because no matter how many times I send in paperwork, it ALWAYS gets lost; or they tell me it's the wrong form; or the date is wrong; or that fax # hasn't worked in over 6 months.

I just got to the point that dealing with them was just too difficult, overwhelming and depressing. At age 50, single, never married, with no retirement savings (other than the meager 401k I started less than one year ago at my current wonderful, secure, but low paying administrative job), I only have $2,500 in credit card debt and own a 10 year old used car.

I own no property or anything of value/equity because I have lived from paycheck to paycheck basically all of my adult life. My social security benefits will be around $700 per month when - or if - I'm ever able to retire.

That will be my main income, but if the government doesn't close the loophole allowing the garnishment of social security checks, it will be considerably less. As a single adult, I have no fall back support other than hoping to be able to live in the attic of a niece or nephew's home.

I have spoken with a bankruptcy attorney regarding the potential discharge of my student loans. His suggestion was to wait to see if the tide of decisions began favoring the debtor.

I don't want to go through bankruptcy, but I also cannot bear the thought of paying $50/month (which is all I could afford realistically), which would never even make a dent in the interest on the loans, and yet would cause me considerable financial difficulty. Is this a good time to try to get my loans discharged or should I just keep fighting the losing battle?



Dear Joy,

I'm not sure if the bankruptcy attorney you met with is aware the tide has been turning and is waiting for a slam dunk or what. For example, see these two cases, here and here, which are right on target. For even more recent cases, look here.

While you may not want to file bankruptcy, it is the only legal tool you have to alter your financial path. And when you read those two cases I linked to you will see the bankruptcy court judges were sympathetic to the retirement crisis facing people just like you.

Without doing something you will set yourself up for retiring broke, poor, in subsidized housing, and hungry. Your current situation isn't a problem, it's a crisis.

In lieu of pursuing a bankruptcy discharge the best worst option is to consolidate your federal student loans and look at one of the income driven repayment programs. But you should read this and this.

It's not clear from your question why some of your loans could not be consolidated. Private maybe? I don't know. But absent a bankruptcy discharge or consolidation and income driven payment then you would be out of luck with a good solution on any private student loan you may hold, except for just defaulting. See Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.

I understand why the bankruptcy attorney might be hesitant to take on the case but until more attorneys tackle these cases the easy wins will not exist. If you want to give your attorney some more material to catch up on the latest changes, ask them to read this.

It seems you would meet the modern definition of undue hardship and the Department of Education even provides support why your loans would be eligible for a bankruptcy discharge.

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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.