Help A Reader: I’ve Got Serious Student Loans

I’ve been stuck, seriously stuck with the worst case of writer’s block. I could not get one word on a page…that is until I received an e-mail from Terri.  Here goes!

Hi there! Your story is inspiring and I could use some practical, objective advice. I will give you the outline version of my situation.

– Graduated from college with $90k in student loan debt *anxiety strikes just from typing that number*
– That is for both undergrad and grad school
– Employed full-time but only making $19/hr
– No credit card debt (thankfully)
– Car is paid off. Nothing too fancy, a dependable 2005 Jeep
– No outstanding medical debt
– I definitely do not live beyond my means. Cook dinner at home 90% of the time, no fancy vacations or shopping sprees

I’m actually quite sensible with my money but the student loans are overwhelming! With my current salary, I am only making enough to pay bills and meet living expenses. I’ve been looking diligently for a better job but that hasn’t happened yet. I know my earning potential is great, but right now I feel stuck.

Advice, please!!! Thank you in advance.

I loveeeee some reader advice. It makes the writing juices flow. Here goes my advice.

Terri, you’re doing great! I know that as humans we tend to focus on the negative, but you have lots of positives going for you right now. From your message, you appear to be healthy and you have a job that pays more than minimum wage. Everything else is up from there!

Beyond your student loans, you have no post consumer debt which puts you miles ahead of many new grads. I would love to have known if your loans are a mixture of private and subsidized loans, what the interest is that you’re paying on them and the monthly combined totals. It would also help to know where you live as living expenses on the coasts vastly differ from other areas. No worry, we’ll help anyway (I say we because we’re all in this debt thing together).

If you work a minimum of 40 hours per week your weekly wage is $760 before tax or $39,520 annualized. That’s not bad for a recent college graduate. Yes, we all want the fabulous job with the fabulous salary and while you may be fabulous some of that financial fabulosity (yes Kimora Lee, I borrowed your word) will come with time. Right now you want to do a bit more than survive. You will need to cut costs as much as humanly possible.

Where do you live?

Your highest cost right now is probably simply keeping a roof over your head. This is where I always advise to swallow a little pride. If you’re living in an apartment, can you take on a roommate and split the bills?  My buddy Mike Choi paid for his college education and his entire mortgage by renting out rooms. He paid his 30-year mortgage off in six years that way.

If you’re not willing to take on roommates, you might need to move. Are you located in the swanky part of town? Can you deal with a little dust? Look for a cheaper apartment. Maybe you’ll move from a one bedroom to a studio apartment or from 800 square feet to 600 square feet. One of my tenants wanted the larger of two apartments that I had for rent but when we went through her finances, I pointed out that she was better financially suited to the smaller apartment. Don’t let all of the fancy home shows fool you into upgrading your living standards into something that you really can’t afford.

Are you living at home with your parents? Would they be willing to forgo rent as long as you pitch in to reduce their work load? Are you willing to shovel snow, mow the lawn, take out the trash, do the laundry, etc? Free or reduced cost housing will help reduce your largest cost of living allowing you to pitch that extra money towards that student loan bill.

Are you spending too much on technology?

We’re all plugged in all day all time and we pay for the privilege. I switched phone plans to a prepaid phone and kept my number. I now pay $40 per month with taxes and fees included instead of a normal $80 to $100 per month on phone bills. If you can hop on a family based plan splitting the cost can save you money.

I love television, but I hate paying the cable bill. You can not escape these days without a bill that is over $100 every month. If you don’t watch television too much, try switching to Netflix, Hulu or even Roku. My Netflix is getting a serious work out because the thought of spending $1,800 a year just to watch television in the few hours when I’m home and awake gives me hives.

Same thing goes for getting expensive toys all of the time. Your cell phone shouldn’t be the price of a car payment.  My phone was $50 on sale at Best Buy and it does these things that you wouldn’t believe. It makes and receives calls; allows me to surf the web, download apps, e-mail, tweet, Facebook and most importantly, check my bank accounts for tenant rent payments.  🙂

Is money slipping through your fingers?

Do you think you know where your money is going? Are you sure? Until I forced myself onto the envelope system, I never really know where my money was going.  The minute I started splitting my cash into envelopes and working strictly from cash – no credit or debit cards included – I really saw where my money was going.

Was getting a latte from Starbucks part of the problem? Heck yes! When you’re making $19 an hour and $4 of it goes to a just one beverage it’ll add up fast. Thankfully, you already make your own food, so that might not be your problem.  However, I guarantee that you have small habits that might be leeching money that you haven’t noticed.  Bite the bullet and put yourself on a budget.  I hate that “b” word but it works. My budget was done with envelopes.  When I mastered that I ditched them like yesterday’s news. Your budget might need to be electronic like the Mint app or something. Low tech? Try any of these budgeting templates. Find what works for you.

How motivated are you?

You have a job and you’ve been looking for another one. Perfect. Don’t rest on your laurels settling for what you have. With that said, don’t forget to check your current employer for openings that might come with higher pay. This may involve some skills improvement on your part so stay sharp. Approach your manager and say that you are interested in advancing to the next level and ask if they are willing to work with you on a career path.

If that doesn’t work, are you willing to pick up a second job?  Do you even have time? With my 1.5 hour commute to work each way, I really didn’t.  Instead I started selling stuff. You name it, I’ve sold it. I’ve sold Beanie Babies.  I’ve sold candy.  I’ve sold costume jewelry. I’ve sold adult toys. Let’s not talk about that one. You can sell stuff (eBay, flea markets, Amazon, Etsy) or you can sell your free time.  No, not like that.  Sites such as Fiverr, eLance and oDesk have people who need stuff done and will pay you for you to do it. If you have transferable skills that you can use outside of work, why not get paid on your own time to do your own gigs?  Don’t forget Craig’s List too. Just be wary of creepy psychos, killers and stalkers.

The fact is, you can only cut so much. You will have to raise your income somehow. Be eagle-eyed and constantly on the lookout for something new with higher pay. That $90,000 gorilla needs to get fed.

Let’s get practical

In all honesty, you have to look at your student loans and be as strategic is possible in your repayment. If you have a private loan, would you consider refinancing it? Every interest point that you shave from your loan can result in thousands of dollars in interest being shaved from your loan as well. A penny saved is a penny that you don’t have to send to the student loan people.

Do you have loans held by the federal government? How about consolidating? Student loan rates are still pretty dang low. Consolidating can result in one lower monthly payment, but be cautious that the rate on the consolidated loan doesn’t result in a you paying more interest.

Can you change how you’re repaying your loan? Try splitting your payments up into a biweekly period. This will result in one extra monthly payment made per year without any real effort. Another strategy involves paying more on the loan with the highest interest so that you end up repaying less overall.

Whatever you do, I’m confident that you can dig out of the $90,000 student loan hole and go on to that fabulous life that we discussed earlier. It might take a few years, but, I’m confident that you can do it.

If you need help with something, feel free to shoot me a message. I’m always happy to help.

Alright gang.  You see what I have for Terri. What do you recommend?

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22 thoughts on “Help A Reader: I’ve Got Serious Student Loans

  • Stay the course! We are also paying off massive student loan debt, credit card debt, medical debt, and car loans totaling over $200,000. We also have 3 kids. I stay focused on the tiny steps we can take and l the small pleasure in life.

  • All good suggestions, but here’s one that some people might say is a little radical. Move. I mean relocate to a state where hiring is robust, and salaries are great. By that, I mean North Dakota. I read an article yesterday about how McDonald’s workers are making $20 an hour and other people whose work is connected to the oil fields are making more than that. Housing sucks but if you can suck it up for a year or two, you would make serious progress toward paying off those loans. Too often we forget that our situations can be improved simply by using our feet.

    • Kathy this is an awesome idea! I was considering moving there myself and had a serious conversation with the other half about doing it for two years to pay some debts off. Six-figure jobs to be had and they’re in need of people.

    • You are the second person who has mentioned North Dakota as an option…the first being my god-mother a few days a go. Sounds like I will need to look into that!

      • Be sure to really do your research before you jump into a move. In some parts of North Dakota housing has gotten crazy expensive. Which explains why McDonalds workers are making 20 an hour. I’m not saying don’t do it. Just make sure you do your research.

  • Oh wow.

    First off, if you want it bad enough, you’ll make it. I’ve got way more debt than that and have got nothing but hope in me.

    You sound like you’re doing about as close to what you can for keeping your spending in check, so it looks like your problem is almost entirely on the earning side.

    I’d focus your efforts on doing whatever it takes to use your degree and your school connections to earn more and yes, you probably will have to switch companies to do it.

    If the problem is that you’re in an industry (that you refuse to leave) where salaries are simply always going to be low, then look into repayment programs that will eventually forgive your student loan debt (Note that this only makes sense for federal loans). Tough to know which one to steer you toward without knowing more about your situation.

    Anyhow, good luck. Stay motivated and it’ll happen

    • Hi Mario. Thank you for the reply. My loans are a mix of federal and private. And the completely unnerving part is that even though I am paying on my loans, the balances seem to be going up or not moving at all 🙁 Someone suggested Greenpath to me…any experience with them? Also, I have been looking for a job that would provide loan assistance but it appears that those positions are geared towards teaching, law or medical. None of which I have experience with.

  • When it comes to paying off debt, if she doesn’t have a roommate, she has no choice but to get one.

    If I’m not mistaken, her student loan payments, if not on IBR, are probably close to $1,1000 a month, if not more. For that kind of payment, it’s not financially prudent to live on your own.

    My friend lived in Philly in a house that wasn’t in great shape and she put up with some CRAZY roommates (one even yelled at me when I visited) but it was all worth it for $300 rent for a house that was an ideal location. Compare that to getting a studio for $1,000 a month and that’s a $700 savings that was going to my friend’s student loans.

    Also, when you pay that much in loans, if you can’t get a 2nd job, then paying for food, coffee, cable tv, big carrier cell phones, anything really should be cut out as much as possible. It sucks but remember, it’s only temporary! And eventually you’ll make more money.

    Lastly, if you’ve been working at your full time job for over two years and you haven’t gotten a raise, it’s time to find a new job where you can get a 20% increase in salary with the new position.

  • Just keep the right track and consistency is the key. $19/hour is a good start, for me avoiding impulse buying and having a goal would lead you to pay your student loan. I don’t have a student loan before because my parents paid my whole tuition.

  • This is Terri…thank you all so much for the advice and response! Just to answer a few of the questions
    – My biggest expenditure is rent at $700. I’m kind of leery of taking on a roommate that I don’t know and most of my friends are married, living out of state, etc. I live in Michigan.
    – I do feel like my biggest issue is the earnings…so I am looking for jobs relentlessly that pay more and I’ve reached out to my current employer about other positions.
    – I have decided to have my cable cut off (that will save $110/month). Realistically I hardly ever watch TV between work, church, gym, etc. I will keep the internet since my job sometimes requires me to work from home
    – No babies!!!! enough said. lol
    – I’ve listed random stuff on Amazon (books, etc) and I am planning to have yard sales as soon as the Michigan weather breaks. Proceeds to go straight to the loans!
    – The loans are a mix of private and federal. Some are in deferment because the payment was just getting to be too much
    – I have not been able to find a job in my field that meets the loan forgiveness criteria. My degrees are in business/HR

    I know thats a lot of information but I really do appreciate you all!! Sometimes it feels like I am the only person in the world with this amount of debt…but that cant be true since student loan debt is at 1 trillion dollars 🙁

  • I would recommend that she look is to positions with the government where they will actually pay off big chunks (if not the whole thing) as long as you work for them for a certain period of time. One of my best friends has HUGE student loans from getting his PhD and he’s been working in the prison system because they are paying off his loans for him over the course of several years…not to mention the great benefits and nice salary he receives along the way.

    • That’s great as long as he does not get caught in a lay-off during budget cuts. And there are ALWAYS budget cuts. Then the college loan repayment is thrown out the window and you will be reverted back to owing the full balance.

      At least that’s the way it is with working for the nonprofits. And if you’ve already BEEN working there 5 years, they won’t just simply let you pay up and then just have another 5 years to pay. Also, if you’re layed off & no longer work for a nonprofit, they’ll kick you back to paying the full balance. They ARE the payday loan co of America. They’re asking you to gamble that you’ll be able to keep that job for a whole 10 years, which is almost impossible in our country. And when you can’t, guess what, now you owe the FULL amt again.

  • These are some great points. Becoming aware of where your money goes is half the battle. With our electronic system, it is so easy to have your money walk out the door without you even looking up. The envelope system is a great tool, as well as some of the electronic tools. Thanks for the insightful post!

  • Wow, that was one of the most informative posts I’ve ever seen and it applies perfectly to my situation. I graduated college 6 months ago and am 4 months into my first ‘real’ career type job…and it’s looking very promising! I’m making much more money than I ever have before, but I started paying student loans last month and now I’m really feeling the squeeze. I agree with everything you said, and I find that the biggest money killers that can easily be controlled are entertainment bills (Netflix has more than you could ever want, so ditch cable…and most phones and phone plans are WAY more than you really need…resist the urge to get the shiniest, newest phone) and food. I got used to eating out every day for lunch and even though I’d try to pick the cheapest options at the cheapest fast food places, it added up QUICK. I’m fortunate enough to have a job now that provides free food, so I try to eat lunch here as often as possible and that saves me tons. Of course, that’s a rarity, but there’s no reason you can’t cook every night and bring the leftovers to work the next day. Those simple things can make a huge difference!

    • Mark,

      I ditched the cable last month 🙂 I did keep the Internet service because I need that for work that I do from home. Now my cable bill has gone from $120/month to $40/month.

      Even better, my sister is allowing me to use her netflix account so there’s no cost there!

  • These are some excellent factors. Becoming conscious of where your cash goes is 50 percent the fight. With our digital program, it is so simple to have your cash move out the entrance without you even looking up. The package program is a useful gizmo, as well as some of the digital resources. Thanks for the informative post!

  • Forget moving to North Dakota for the “high paying jobs.” Try getting the job FIRST. This scam scenario repeats itself every 10 yrs. In 1982, everyone wanted to move to Dallas. Then when they got there, there weren’t any such jobs & they ended up on the soup lines. Second, if you GOT a high paying job, i.e., $50-100k, IRS is going to come in for the kill and take 40% of your gross pay. You have to decide just how much you want to give IRS, because you’ll never see that money again. Granted, the coastal living is higher. I quit renting a house and found a walk-out basement apt that is meticulously clean and very nice, and I only pay $450 mth for a 1 bdrm. $25 light bill, etc. But you can only find these deals with elderly landlords who own their properties outright. They’re not under the gun to pay big mortgages and property taxes for their rental houses, and the big house. You’ll never see utilty or cell phone money again in life – the trick is to keep it to $25-$50 mth for each one. You can do this living in a small place. But all this struggling and big peppy talk isn’t going to pay your college loan off, when your principal was only $20k to begin with, and now they’ve added 8% interest FOR YEARS to it (pure gov’t payday loan profit), and you still have a $75-100k balance. I can only say, flip 2-3 houses & pay it off lump sum, and stop the struggle. Financial struggle makes you old.

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