Help! I’m going to be stuck paying student loans the rest of my life!

Michael Lux Blog, Lower Payments, Student Loans 7 Comments

This is something that I often hear, but the truth is, it is rarely the case.

Without question, student loans can be really overwhelming.  In fact, many borrowers are staring at a mountain of debt that they couldn’t pay off even if they used every dime they made for years.

The good news is that there are a number of different ways that borrowers can manage their loans in order to see the light at the end of the tunnel.  Things may seem bleak, but there is a path to student debt freedom in nearly every circumstance.

But I cannot afford my student debt!

If you have federal student loans, you should always be able to afford your debt AND know that they will eventually be paid off in full.  The federal government has income driven plans that only require a portion of your discretionary income.  If you don’t make any money; you are not required to pay any money.  Best of all, if you stay enrolled in the program for 20 to 25 years, the remaining student debt can be forgiven.

Private loans are far less flexible for people who cannot afford payments.  These lenders can be especially ruthless.  However, some lenders are slowly starting to realize that collecting some money towards the debt is better than not getting any at all.  As a result, some have created programs that temporarily reduce your interest rate during a period of hardship, at Navient for example, it is called the rate reduction plan.  Lenders are hesitant to offer these programs and they do not advertise them, but if you are diligent, it can be done.

I make too much money to get help on my loans, but I can barely keep up.

When you can only afford making the minimum payments on all of your student loans, it really can seem like you will be stuck paying them forever.  With an income too high to qualify for interest rate reductions, but insufficient to attack the debt, it is easy to seem trapped.

Making minimum payments is the exact recipe to be paying student loans the rest of your life.  It is also exactly what your lenders want you to be doing.  Fortunately, it is an avoidable situation.

These three steps can get you on the road to debt elimination:

Step 1: Try to get all of your minimum payments lowered.  With federal loans, this usually means signing up for an income driven plan such as Income Based Repayment or Pay As You Earn.  These plans only require a small portion of your income and can free up cash to attack your highest interest debt.

Step 2: Get your interest rates lowered.  If you don’t qualify for a need-based rate reduction, you may be able to refinance your loans on the private market.  Lower interest rates mean more of your payments attack the principal balance and less goes towards lender profits.

Step 3: Pick one loan and attack.  Even if you only have an extra $10 per month to pay beyond the minimum payment, use it.  As soon as you are able to eliminate one of your student loans, you now have extra cash each month to attack another loan.  With each loan defeated, the next battle gets easier.

Bankruptcy

If you are buried under private loan debt that you have no meaningful chance at every paying off, you could potentially get them discharged in a bankruptcy.  The process is very difficult, but not impossible.  The key here is finding a local attorney who specializes in student debt.

However, it is important to note that this option will only work for people in truly impossible repayment situations.  If you are able to earn an income and pay towards your student loans, bankruptcy will be a very tough sell to a judge.

Bottom Line

Regardless of what you specific situation is, odds a pretty good that there is a route to freedom, even if it doesn’t seem like it.  If you have questions or what ideas for ways to manage your student debt, stop by the student loan forums to get some suggestions.

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Manfred Man
Manfred Man

You forgot to mention that “forgiven” loans instantly become taxable income for the IRS gang to feast on and tax total must be paid in full immediately.

The Student Loan Sherpa
Reply to  Manfred Man

That is certainly an issue. Though it is worth investigating the IRS treatment of people who are insolvent.

Manfred Man
Manfred Man

It’s hopeless and evil

Manfred Man
Manfred Man

We can always just hope the whole sham collapses under itself and we all get a reset. Winning the lottery would get her done I suppose. My monthly payment which is barely within my ability to pay through idr program does not even cover the monthly interest completely so prinicpal is actually going to slowly grow over 25 years even when making required payments. After 25 years of paying what almost covers monthly interest on the principal charges I will have payed around 75k which is more than I even borrowed. Interest is just some arbitrary percentage of extra money lenders grab up and that’s just how it is but seems like paying that much money back even though not really paying off principal technically should count and not allow for the IRS to then get their grubby hands on the action by claiming the forgiven principal is taxable income.

Manfred Man
Manfred Man

Understand that I had no interest in proper punctuation while purging.

Kenya Austin
Kenya Austin

I decided to go back school, finish my education and get a degree in my 30s. Sometimes I wonder whether it was worth it. Everyone told me to take the loans because after obtaining a degree I would be making enough to cover. Unfortunately, I graduated 1 year before the worst economic recession ever. Our company closed and I was laid off in 2008. My degree was in Marketing and at that time the Marketing teams were the first to be outsourced. I ended up going from a very lucrative career to working at the airport for $10.50 an hour. All with 50K in student loans. It took almost 6 years to get back on my feet while the interest on my loan compounded.
I feel that I will be paying student loans until the day I die. The thought brings so much depression and regret. If I knew then what I know now I may have sacrificed my education to save my future. How is one to afford the American dream of home ownership and the ability to get from under water. This is not what I thought it would be.

The Student Loan Sherpa
Reply to  Kenya Austin

Kenya, that is heartbreaking. Student loans were designed to open the doors to college and instead, they have become walls separating the haves from the have nots.

I don’t know if this will make you feel any better, but you are not alone.

Wishing you all the best,

Michael