Living With Debt

What To Do When Your Debt Situation Feels Hopeless (From A Student Loan Expert)

By | Tuesday, December 20, 2016


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 lawyers married to other lawyers, who cannot make their money (and debt) work, despite earning more money than the vast majority of Americans ever will. 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 two 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 that aforementioned lawyer-married-to-a-lawyer, someone who, from the outside, should have everything right when it comes to money — but who finds herself struggling all the same. So, without further ado, let’s get into it!

Hi Chelsea!

My name is Devon and I am an associate attorney working in rural Pennsylvania. I feel like I am absolutely drowning! I recently got married and my husband and I combined incomes but not bank accounts (yet). It is out of pure laziness. Here is a little overview of our finances. Thank you so much for your consideration.

I currently earn a base salary of $72,500. My side hustle is court appointments and I take on whatever I possibly can. This year so far I have earned about $15,000 on them but most of that money went to pay for my wedding in April. Taxes are not withheld from that amount so I put 30% of each gig into my savings account. I contribute 10% of my salary to my 401K.

My husband earns a base salary of $75,000. He is also an attorney and his job does not allow side hustles. He contributes 6% to his 401K.

Debt (gulp)
I have approximately $16,000 in loans from undergrad. I am paying about $400/month on the undergrad debt through American Education Services. Over the past two months, I have taken some of the smaller loans and paid them in full (approximately $1,300).

I also have approximately $175,000 in student debt from law school. I pay about $1,100/month on the law school debt through Nelnet. I am on the Income Based Repayment Plan. I tried to refinance when I got out of law school, but Nelnet basically advised me that it would not be beneficial.

My husband has student loan debt in the amount of $43,000, but his parents are currently making payments on it. I believe we will have to take it over someday but that day is not today. However, I think the payment they are making is basically just keeping the interest at bay.

We have $6,000 in credit card debt. It is all on one card. We have a lot of other cards with zero balance. We typically pay them off each month but this card got a little out of control.

We are currently renting at $1,450/per month and are locked into a two-year lease. At the end of the lease we would like to buy a house.

My car payment is $400/month. My husbands is half that. We both have life insurance and disability insurance policies that we pay yearly premiums on. We have car insurance premiums as well.

We definitely like to eat out and go for drinks. I love to cook, so our food budget is probably way higher than it needs to be. I also have a wicked little shopping habit that I know has slowed me down in my financial goals.

We have about $8,000 in savings but a large portion of that is the 30% that I set aside for taxes.

Phew! I think that is everything.

I have totally come to peace with the fact that I am going to be paying on these student loans every month for a long time and that the payment will be a significant amount of my income. But I cannot come to peace with the fact that I do not understand my debt. These payments are so big but the balance never goes down.

It just seems like my husband and I should be in a better place financially than what we are. We have each been working as attorneys for the past three years. I worry so much about my student debt. So many of your articles feature people who have $40,000 or $50,000 and I just think, “I could manage that.” I don’t know where to even begin with six figures of debt hanging over my head. I am truly working my butt off and I just feel like the money I pump into those loans every month doesn’t even touch the debt. Compound that with the fact that I am a newlywed and I think my financial profile would resonate with a lot of people. My financial goals and habits are pretty on point with many people my age. I want a house, I want a savings account with a nice cushion and I want to get a grip on my student loans.

I would truly love for Andy to help me. Thank you so much for your consideration.



Hi Devon,

First off, you’ve got a nice side hustle going! That extra income will definitely help in your quest to get your loans under control.

When it comes to saving more money, you’ve really answered that question for yourself already in terms of what you can do better. You’ve admitted there’s room to cut back on the food budget and shopping. Just a little bit of mindfulness can go a long way in helping you be more aware of unnecessary spending and avoiding it. Whatever money you save, put that money towards your debt instead.

In terms of paying off debt, sounds like that credit card debt needs to go! I recommend paying off debt with the highest interest rates first and working your way down with the debt avalanche. And though you didn’t include interest rates, I’m betting your credit cards have the highest rates of all the debt you owe.

So how about those student loans that don’t seem to get any smaller? Income-driven repayment plans are typically the slowest way to pay off your student debt. Since the payments are reduced, most of that money goes toward interest charges and barely makes a dent in the principal balance. Plus, a longer repayment period means paying more interest over the life of your loans.

This is probably why it feels like you keep throwing money at these loans but don’t see any progress. Of course, monthly payments totaling $1,500 is obviously pretty high, so I understand it’s not easy to pay more than that.

Based on your current debt and income, you might be eligible for forgiveness of your remaining balance through your Income-Based Repayment plan. However, if your income increases substantially, you might not. Even if you do qualify for forgiveness, you’re looking at 20 years of payments in the meantime – which is a long time! (You can use an IBR calculator to help you figure it out).

Have you considered refinancing your student loans through an online lender such as SoFi, Earnest, or another? It may be worth looking into, as it could help you consolidate your debt at a lower interest rate and save quite a bit of money over time.

Just keep in mind that if you do refinance, you’ll lose access to your Income-Based Repayment and other federal student loan repayment options. It’s a tradeoff to consider.

If you’re not able to or don’t want to refinance your loans, you’re likely going to need to increase your income somehow to be able to afford extra payments and get rid of that debt faster.


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