I want to start off by saying college can change your life in many ways. Those ways are mostly beneficial, but it can also leave you in a financial mess if you don’t plan accordingly. And I’m not even talking about all those late-night $5 lattes and energy drinks.
Student loan debt is a very real thing. And when you are sitting in the library stressing about midterms, it is the very last thing on your mind. It felt so far away in those moments to me. But trust me, the time will come when all of those bills start piling up in your mailbox. What are your plans for that moment? Are you guaranteed a job when you graduate? Are you paying on those loans now while you are in school? Do you plan to defer those payments until you find a place to live and work?
Well, I am going to tell you what I did, and hope you learn something from it. I did nothing. I mean, literally, nothing. When those monthly student loan bills finally came in I had a total freak out and I deferred my payments. This is when you make an agreement with the lender to make payments at a later date because of financial hardship. But then I deferred again…and then again. And like expected, eventually, they didn’t allow any more deferments. So I ignored the lender’s mail and phone calls. I had three of these lenders after me at this time, it got tricky. Next was the collections mail and phone calls. Can you guess what I did there? Yup, I ignored it all, I pretended it wasn’t happening. After all, I didn’t get to put my degree to work at a fabulous job making $80k a year as I had planned. I got a normal job making enough money to afford a normal life (which was totally okay). But that meant I did not make enough money to take on those big $750 monthly student loan payments that I owed. I couldn’t believe I took out so much money to go to college. None of those loan amounts seemed real when I was having fun picking out my classes and buying books.
Let’s fast forward five years. I started making occasional payments. My workplace even started to make payments towards one of my loans. (This type of student loan repayment benefit is becoming more common every year — make sure you ask your employer if they offer something similar.) I figured that, with time, I would start making full regular payments. But I always had some bogus reason why I couldn’t start now. “Right after I get my car serviced,” “As soon as I pay off my credit card,” “My mom’s cat sitter might need to borrow money next week; I’ll just wait another month,” and so on. I could come up with any reason not to start paying off that debt seriously.
In reality, I didn’t want to face it at all — that number was too big. It was never going to budge. I got comfortable ignoring it, and too comfortable at that. That is, until this year, when my $1,500 tax refund got taken by the US Department of Education because of my defaulted student loans. After doing some research I realized my paychecks could be garnished next if I didn’t handle this, which is when your employer is forced to take money from your paycheck to put towards your defaulted loan. Yikes — the U.S. Department of Education is not one to mess with! It was like the universe slapped me in the face and told me it was time to grow up. So here I was, putting on my big girl pants and finally trying my best.
It was time to finally face my student loan debts, and my credit issues in general. I got rid of my credit cards, canceled my subscription boxes and my cable, and stopped hitting so many damn coffee shops. But what I did not expect was how much bigger my monster loans had grown during the time I ignored them. One of my defaulted loans grew by $7,000 in fees alone! Think of what you can do with $7,000. I could pay my entire car off; I could go on the craziest vacation of my life. Oh my god.
And this was just the extra fees — the interest was growing on all of these loans, too! And the sad thing is that I never even paid attention to how much. I hadn’t wanted to face this. It depressed me, and it made me feel trapped and helpless. But let me tell you, that feeling is amplified by 100 when your money gets taken and you realize you owe way more than you thought, thanks to your own carelessness.
It took SO many phone calls to get things back in order. I spent time working out payment plans and sending in proof of my income to the debt collectors handing my loans. One agency even had me outline every single monthly expense I had. And I mean everything: rent, food expenses, internet, car insurance, gas, other loan repayment bills, everything you can think of. They compared these monthly expenses to my income and came up with a reasonable payment for me to make. But surprisingly, at the end of the day, these agencies all worked with me to come up with payments I could actually afford.
I previously didn’t think I had any options, so I’d just given up before I even tried tackling my debt situation. But I had options that whole damn time — and so many. I just never took advantage of them. I never took the time to face my fear and handle this. If you are in this situation, or even just want to plan loan repayments in advance, know that there are many options for you. Your loan provider or agency may be able to set you up on an income-driven repayment plan, which is where they evaluate your income and give you a reasonable monthly bill (many places will do this before you get behind or even go into default). If that is still too much, you can ask them to look at your monthly expenses compared to your income, the same way I did. For this, I filled out a loan rehabilitation income and expense form.
These are the methods I used — you can read about other options, and what to expect if you go into default, here. I also met with a financial advisor who helped me through this process, and he is going to help me with refinancing once everything is completely out of default. I never even considered that possibility five years ago.
As awful as it was the day I realized my tax refund was taken and how screwed I really was, I am so thankful it pushed me to face my fears. I am now paying down every one of my loans, and I am in “good standing” with them all. I also cleared up some smaller debts I had in collections. Lastly, I raised my credit score 30 points in the last four months. My dream of buying a house could actually be a reality in a year or so. And best of all, I came to an agreement that if I make on-time and in-full payments for the next nine months, that $7,000 in fees will be removed. Can I get a high five for that one?!
Use my story as motivation for your own. If you think you are buried in student loan debt, you are not alone. Normal life is still possible, even with debt. There is a whole generation of us living with this, yet not talking about it. It is time we talk about money more. We need to share our experiences — both the losses and the victories. Know that there are options, resources, and even professional help available to you. And the very worst thing you can do is pretend that a problem doesn’t exist, that your debt isn’t real. If you do, I guarantee it will cost you. I just hope it isn’t $8,500, like it (almost) was for me.
Amanda lives in the south coast of Massachusetts. She has a bachelor’s of science in nutrition. She spends her days working in a food production facility. On her days off you will find her practicing yoga, hiking, and cooking.
Image via Unsplash