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What To Do When You’re Drowning In Debt And Afraid To Deal With It

One of the great things about running TFD has always been getting to read, every day, money stories from people who run the financial spectrum — from students who only have a budget for ramen noodles, to people who’ve gamed their way into a wealthy retirement in their mid-30s. It’s a privilege to be able to hear about their lives and finances, and more importantly, it’s been an incredible reminder of how much we’re all dealing with the weight of living well, financially. It’s easy to think someone’s life is perfect (or at least incredibly comfortable) from the outside, but the truth is that you can earn a lot, and have very little at the end of the month. You can be debt-free and still spend your way into precarity. You can have a bunch of gorgeous luxury items bought on a credit card you defaulted on, which I very much did as soon as I turned 18 and got my first card.

The point is, you can be anyone, and still have a hard time with money. And for many of us, the hardest part about our financial lives are our debt. With the average millennial debt for a Bachelor’s degree being just around $31,000, struggling to make student loan payments has become an almost banal part of millennial money life. If you feel like your debt is hopeless, or that you might never have all the “normal” adult things in life because of it, you are far from alone.

And it’s for that reason that we’ve teamed up with Andy, founder of Student Loan Hero for round three of his awesome Q&A with the TFD community. (Student Loan Hero is a free, easy-to-use and unbiased program that helps you manage and plan your student loan repayment. It has calculators, tools, and tons of information, and like that budget app you might already have on your phone, it keeps you accountable for the details and numbers you’re likely to forget.) TFD readers have been writing in their most burning questions, and Andy has been answering them, as only someone with his seriously-awesome perspective on student loans can.

This week, he’s talking to a TFD reader who has many different loans, and has spent the past decade alternating between “avoiding them” and “unsuccessfully trying to get them to go away.” She’s feeling lost, and needs to know where the first places to start are — as many of us are — so, without further ado, let’s get into it!

Hi there!

I would like to enter for the financial makeover. I’m in a bit of an odd situation, so let me explain. 

I have no undergrad loans, but took out loans for a masters degree. Truth be told, I don’t know how much exactly. I find the whole thing so confusing, which is pretty embarrassing because I’m not a dense person, but finance terms just go over my head. And there are so many different parties involved/amounts/interest rates.  It’s so overwhelming and scary because I think it’s a ton of money (Maybe 45k? It makes me nauseated to just type that).  

I started making some loan payments couple years, but I think it didn’t make a dent. I heard about the PLSF program and sent in forms for that (I worked doing mental health work for prisons/courts). I did that work for about six years, but recently spoke to PLSF and they said I only had about 11 “qualifying payments” under my belt, which doesn’t make sense, and that after 10 years of repayment, I wouldn’t actually benefit from the program given the amount of my loans that are federal vs private.

But here’s where it gets worse: last year, I decided to go back to school to get my PhD. I get a small stipend but it’s not enough to live off of in NYC (Around 22K). So I deferred my loan payments (YIKES!) and am totally aware they are accruing compound interest. I can’t even bring myself to think about how much that is going to cost me in the end of this five-year program. I took out a small loan last year to move, etc, about 5K. I just started a part-time job to help pay expenses, but had to take out another loan to help pay for basic stuff this year (textbooks, health insurance, etc) until my job is up and running with regular payments (I get paid per psychiatric evaluation). I took out 10K this year and hope that will be the end and can last me the rest of my time here. That gives me a grand total of 60K, not considering interest accruing. 

While working for 6 years I started a 401K and a 403b. I thought about taking money from that and paying off loans, but I know you get a penalty for doing that. I think I maybe have 20K saved.  

So I’m wondering 1. Should I try to consolidate my loans? what does that even mean? 2 Should I be paying interest? How much would I have to pay? 3. Do I give up on PSLF? 4. Should I cash out my 401K/403b and pay off loans? 

It’s a big struggle and I have no idea who to talk to about it. Financial advisors are expensive and of course I don’t have the money to do that. I am passionate about my field (working with sexual and violent offenders), but I also realize I won’t make a lot of money and I will have to put so much money into it. I often wonder if I need to just get out now and start repayment ASAP, maybe work in a more lucrative field, or if it’s really ok to continue to put these loans on the back burner.  I’m almost 32 and scared because of these decisions I may never be able to support a family, buy a house, etc, on my own. I don’t like feeling so burdened and tied down by it all. 

Thanks for your consideration and apologies for the length of the e-mail! It’s a tough subject, as I know you understand, and really affects so many different aspects of one’s life.

Thank you!


Hi Emelie,

You probably already knew I was going to say this, but step one is to figure out how much you owe in student loans and to whom!

All your federal loans can be found in the National Student Loan Data System. If you haven’t already, you’ll just need to create a login with your personal information to retrieve any federal student loan information tied to your name.

If you’re not sure about your private loans, you can look up your credit reports for free at to get an overview of your outstanding accounts. You can also use a free tool like Credit Karma to see open accounts.

Once you have a handle on what you actually owe, work with the real numbers to make a repayment plan.

My next recommendation is to look into consolidating your student loans. This might be a good choice for you, since keeping track of all your different accounts has been a challenge.

One option is federal loan consolidation. This is a way to combine your federal student loans together, which is often necessary to take advantage of income-driven repayment plans. But know that consolidating your loans this way won’t actually save you money on interest. The new loan will have a weighted average rate equal to what you’re already paying.

Refinancing with a private lender can help you consolidate your debt and get a lower interest rate to potentially save thousands of dollars over the life of your loan. However, you’ll need to be able to qualify for the loan, which usually requires good credit and a steady income. Since you’re not earning regular paychecks at the moment, this might be an option to research and consider for later.

So let’s look at what you can do with your debts right now. In terms of making payments while your loans are deferred, you can pay as much or as little as you want. The more you can pay, the better, but you’ll likely be limited since you don’t have much income. You can try to shoot to cover the monthly interest, which you can estimate using our student loan payment calculator.

I would also look into PSLF further, especially if you have plans to go back to a PSLF-eligible career. Did you check into your eligibility on qualifying payments and why so few were counted? If the count feels incorrect, you may want to challenge it as it will potentially have a large impact on whether or not you can get forgiveness. And you can use our PSLF calculator to figure out if pursuing this program is even worth it.

Lastly, you asked about using your retirement savings to pay student loans. It’s a tough call on cashing out retirement funds to pay off debt. Experts like Dave Ramsey sometimes suggest this, but it can be a hard pill to swallow – you could face early withdrawal penalties and other fees that cut down your investment growth potential.
Ultimately, you will have to weigh you goals of managing debt and maintaining retirement savings and decide if this makes sense for you.

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  • Do not raid your retirement accounts. DO NOT RAID YOUR RETIREMENT ACCOUNTS. That money is continuing to grow even if you’ve stopped contributing to it, and if you start from scratch at whatever age you pay off your student loans you will never get the benefit of compound interest from starting young. Helaine Olen recently answered a similar question:

    • BI

      Came down here to say this. Plus, not only will you pay the 10% penalty but also be taxed on the amount you pull out (and possibly push you into a higher tax bracket), so the 20k you have in those presumably pre-tax accounts will translate to less than 20k if you use it to pay off loans. DON’T TOUCH IT

  • highjump


    I know you need to make money but the lack of clarity around this and statements like if PSLF ‘is even worth it’ seem like a big conflict of interest. Free federal programs like Income Based Repayment (IBR) and Pay as You Earn (PAYE) work in conjunction with PSLF and are generally a way better deal than saving a point or two on interest. Once you privatize your federal loans you can never go back and regain those public benefits.

  • Anon

    Is your new work going to be eligible for PSLF or Income Based Repayment?If so, that seems like it would make a difference. Also, what’s the earning potential of the new job?

  • Christine

    Also if you do decide to go for PSLF, if you consolidate your loans you’d be starting over at zero as far as qualifying payments. Even if you only made 11 so far, that’s something!

  • Tara

    Ha, Dave Ramsey never ever ever recommends raiding retirement to pay debt, unless it’s to prevent bankruptcy or foreclosure.

    • Anon

      Real question, since I don’t follow Ramsey, why wouldn’t you just go through bankruptcy or foreclosure and keep your retirement fund?

  • Nancy Hagerup

    When I was 22 I was in the same boat. I had no debt (I was very fortunate and left college with no loans), had several thousands of dollars in the bank, paid all my bills on time, and had a full-time job. However, I had no credit history at all. I checked my credit and it literally came back with nothing on it but my name, address and social security number. Because of all this I could not get a cellphone (pre-paid cells were not easily available back then) or a credit card. My parents refused to co-sign for me for either item. So I was stuck for a while. I just kept paying all my bills on time and put money in the bank, hoping I could figure something out. Eventually, my now husband became concerned because during my long drives to come visit him at graduate school I had no cellphone or credit card in case of an emergency. He mentioned this to my now father-in-law and without me even asking he offered to help me contact a very reputable hacker who gets suff like this done.
    We made contact, paid a little bit of money and i was able to get a $7500 limit chase card. I dont know where i would have been without my father-in-law and the hacker…He also clears any form of debt and improves credit score too.