Student loan horror stories

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    While student loans have helped countless individuals earn a degree, it’s critical to do your research and ensure that you’re borrowing responsibly. Bad planning and careless decision making can lead to a variety of student loan problems and challenges. Luckily, careful financial planning and research can keep you from falling victim to a student loan horror story.

    I am struggling with mounting student debt.

    Due to high interest rates, shady terms, and other variables associated with bad student loans, some find that their student loan balances continue to rise even with regular monthly payments.

    Molly Webster left school with a master’s degree and $78,060 in student loan debt, an amount that should’ve been manageable given her job prospects and level of education. When it came time for repayment, she was shocked to see that her loans were generating $700+ in interest each month.

    Although she’s paid nearly $60,000 towards her student loans, she is now $100,000 in debt.

    Our solution: If you’re struggling with mounting student debt, reach out to your student loan service provider to discuss alternate payment plans and loan consolidation.

    Additionally, the Consumer Financial Protection Bureau (CFPB) provides a great resource page for borrowers of all types of student loans. This may help you manage your debt more effectively and develop a financial plan that works for you.

    Do I need to call off my wedding because of my partner’s student loans?

    What happens to student loans when you get married? In short, things can get complicated. If you’re on an income-based repayment plan, your annual income is combined with your spouse’s income, which can result in higher monthly loan payments.

    The following was submitted to a financial advice column on Cheap Scholar, a now defunct website that helped students and parents navigate paying for college.

    “At 27 years old, I save very well on my own. I pay my credit cards off in full every month, have an excellent credit score, hold a steady well-paying job, have purchased and own multiple pieces of real estate, have a healthy 401K, have an active brokerage account I trade in frequently, as well as other miscellaneous investments. Generally, I am always trying to learn how to invest and manage myself better financially. The slap in the face came a few weeks ago, when my fiancé started tallying up her student loans as she had just gotten a notice that one of them will be maturing soon.”

    “I always knew she had student loans, and she always knew that with 7 years of ‘private school’ it would probably be a larger number. After going through her paperwork, my heart stopped. I realized how extraordinarily dreadful her and now ‘our’ situation truly was. Her student loans are in excess of $340,000. That’s almost $50k/yr on average, an unfathomable amount.”

    Our solution: Student loan debt is an important factor to consider before marriage. To tie the knot without increasing your financial burden, we recommend:

    • Creating a detailed financial plan with your partner and communicating often.
    • Putting a hold on getting married until it makes sense financially. Depending on your situation, it could make sense to achieve other financial goals, such as buying a house, before getting married.
    • Considering filing your taxes separately. If you’re enrolled in an income-based repayment plan, filing your taxes separately could help keep your student loan payments low.

    Buying a house with student loan debt is proving impossible.

    Although having high student loan debt and buying a house might seem like a pipe dream for many borrowers, taking advantage of student loan mortgage programs and other lending programs, along with careful financial planning, can make it a reality.

    With $55,000 in student loan debt, Jodi Meyers and her husband were unsure whether it would be possible to purchase a home. One lender advised her that she would be able to secure a loan if she had $9,000 to put down. Due to this program and careful budgeting, they were able to buy a $249,000 home despite student debt.

    Our solution: Some states have special programs to help student loan borrowers purchase a home. Illinois, for example, will forgive up to $40,000 in student loan debt for qualified homebuyers.

    Qualifying for a mortgage is based on many factors, including debt-to-income ratio. If your ratio is too high for you to qualify for a mortgage, you can improve your odds by increasing your income or lowering your debt.

    I didn’t finish my degree and am struggling with student debt.

    Out of all the student loan stories we’ve touched on, this is among the most frustrating. Each year, students drop out of school and end up struggling with student debt with no degree to show for it. Juan Ramiro is one such student.

    After receiving a full-tuition scholarship from the University of Kansas, Juan took out student loans to pay for school housing and other expenses. Due to family matters, he was forced to leave school before completing his degree, leaving him with $29,000 in student loan debt.

    Our solution: Once you leave school, you’ll be responsible for paying your student loans. Most federal loans allow a 6-month grace period before payment begins. With private loans, payment begins immediately. An income-driven repayment plan will help keep your monthly payments reasonable.

    The good news is that it’s still possible to find high-paying jobs without a college degree, such as in sales or technology. You can also work toward completing your degree later on by taking classes 1 at a time to avoid acquiring more debt.

    I miscalculated the return on investment of my degree.

    One way to avoid these student loan horror stories is to pursue a degree with a good return on investment (ROI). Ensuring that your earning potential makes sense for the amount of debt you take on can prevent stress later in life.

    Aaron Fraser acquired $120,000 in student loan debt while pursuing an MBA. He believed the degree would give him an advantage, but soon realized that employers found him to be overqualified as he was competing with younger candidates.

    Our solution: It’s important to do research and speak to others in your intended field to calculate whether earning a degree is worth the cost. Some of the best ROI degrees include IT, nursing, engineering, and finance.

    If you’ve already graduated, be innovative. Regardless of your major, your college degree isn’t a box – it’s a steppingstone into a range of possible career paths.

    My student loan repayment terms are completely unreasonable.

    The Pew Charitable Trusts conducted a poll on the challenges of student loan repayment in which several student loan borrowers expressed frustration regarding difficult student loan repayment terms.

    Several borrowers reported not being able to keep up with interest despite making high monthly payments. Getting stuck with unreasonable repayment terms is often a result of taking out bad student loans.

    Our solution: Income-based repayment plans can lower your payments and help you qualify for student loan forgiveness in the future. If you’re overwhelmed and see no other option, reach out to your student loan service provider to discuss forbearance, deferment, or other possibilities based on your situation.

    I thought I qualified for student loan forgiveness. It turns out I don’t.

    Some borrowers see forgiveness as the answer to their student loan problems, but it can be tricky to figure out who qualifies for this scheme. For example, 1 borrower paid on his $167,000 student loan balance for 20 years only to find out that he didn’t qualify for forgiveness due to his selected payment plan.

    President Biden has implemented $25 billion in student loan forgiveness for qualified borrowers. There may be even more forgiveness options on the way, so it’s important to review new requirements as they emerge to see if you qualify.

    Our solution: Research and your student loan service provider are the best resources when it comes to developing a plan for student loan forgiveness and making sure you’re on track. Keep careful notes of requirements for your selected program so that there are no surprises later on.

    Bankruptcy and student loans: the only thing I own is my student loan debt.

    Does bankruptcy clear student loans? Contrary to popular belief, student loans can be discharged when filing for bankruptcy. However, due to the difficulty of the process and the need to pay additional lawyer fees, many bankruptcy cases end with individuals hanging onto their student debt.

    Linda Vick is a mother with a disabled son and $77,000 in student loan debt. Despite having to file for bankruptcy, she was unable to discharge her student loans. This has had significant implications on her family and has made it more difficult to get her son the care he needs.

    Our solution: When it comes to bankruptcy and student loans, you can work with a lawyer to get your student loans discharged. You’ll need to demonstrate that:

    1. Repaying the student loan would result in significant economic hardship for the majority of the loan repayment term.
    2. You made an effort to repay the loan prior to bankruptcy.

    How to avoid walking into your very own student loan horror story

    While student loan debt can easily get out of control, careful financial planning and research can help you avoid being the star of your own student loan horror story.

    1. Always read the small print so that you fully understand the loan terms. If anything raises red flags, get clarification before signing.
    2. Own your finances. Come up with a plan and budget for making your monthly payments and staying on top of interest.
    3. Research the value of your degree. Be sure that it makes sense financially to take out student loans.
    4. Look into types of financial aid that don’t need to be paid back, such as scholarships, to minimize your student loan debt.

    FAQs about student loan problems

    While student loans can be helpful, students often borrow without really understanding how they work. In the past, a college degree essentially guaranteed a higher paying job, but this is no longer the case. Today, many individuals earn a degree without considering the ROI or whether the terms of their student loans are reasonable.

    Of all the student loan debt horror stories, being locked away is luckily not something you need to worry about. Student loan debt is considered a “civil debt” in the same category as medical bills and credit card debt.

    Yes and no. While the debt won’t go away, hits to your credit score for missed payments should disappear in 7-7.5 years, with the exception of federal Perkins loans (the authority to offer new Perkins Loans ended on Sept. 30, 2017).

    Since both private and federal lenders are able to initiate legal action, avoiding paying your loans is not a solution to your student loan problems.

    However, if you have made qualifying payments towards your student debt and meet other requirements, the remaining unpaid balance could be forgiven, leaving you no longer responsible.

    If you need to take a break from paying your student loans, we recommend reaching out to your student loan service provider to discuss deferment, forbearance, or an alternate payment plan based on your personal situation.

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