‘It doesn’t seem fair’: I have $131K in student loans and can’t afford my life, despite making $110K a year. How to get out of student-loan debt faster

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Student loan debt is now above $1.7 trillion. So when we received the following letter from a borrower deep in student loan debt, we wanted to help financial professionals – as the loan repayment strategies for them are similar to many borrowers dealing with their loans, would also like to consider potential loan forgiveness. , for making smart budget, for refinancing (Check out the minimum fixed student loan refinance rates you may qualify for here), Here’s his question, and what financial professionals think he and you do to reduce student loan debt.

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Question: I’m 39 now, and I was in a better place in my life than it was about 10 years ago, when I decided to take out over $100,000 in student loans to attend a food policy and nutrition master’s program. The program was the only master’s program I attended, and I didn’t care what the cost was – I didn’t even notice what I was signing for.

Now, in total, between my undergraduate and graduate loans, I owe $131,000. Some loans are federal and some of them are private; One of them charges an interest rate of 6%. Although most of my debt is on hold now (thanks to the federal government), I worry about what will happen when it stops. Debt payments are very expensive, even though I am now a nutrition and public health consultant who works on a contract basis, and I earn a decent salary – $110,000 a year.

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But our mortgage costs $1,100 per month; Daycare is roughly the same, and the car payment is $400. Otherwise, I guess we live too frugally: We bathe our son in a Tupperware tub because our bathroom needs to be renovated, but we don’t have the money for it! We can’t even afford to contribute to retirement or pay for some much-needed dental work. I honestly don’t know what we’re going to do when my debts settle down. How can I get out of debt fast? – Arena

Have a question about getting out of student loans or other debt? Email [email protected]

Answer: First, you’re not alone in feeling overwhelmed by student loan debt, and you’re doing a few things right, such as “limiting mortgages and car loans,” which are both “well within your range for your income level.” are from”. Mitchell C. Hockenbury, a certified financial planner at 1440 Financial Partners in Kansas City. But, says Hockenbury, with your lower mortgage and other reasonable expenses, you should see if there’s more money to pay off the loan. Even if there isn’t, once the daycare is closed, you’ll have money to pay off debt more aggressively.

The next question is whether to refinance a loan to save money. But first, consider that your federal loan payments are currently on hold until May 2022, and you should be careful about refinancing federal debt into a private loan because you’ll lose some federal debt protection, such as income-based repayment and forgiveness. the option. (You can find details on how much refinancing can save you here). But Ethan Miller, founder of Washington, D.C.-based financial planning firm Planning for Progress, says Erin is likely to refinance some of her personal loans, as rates are just too low (Check out the minimum fixed student loan refinance rates you may qualify for here), “If you feel confident in your income, and you know you’ll have a job for many years, this is the best option,” Miller says.

There are other options, says Hockenbury: “Is there a possibility to take a cash-out ref? Interest rates are low, housing prices have gone up. Perhaps she could have used the cash to pay off some of the debt,” he says. . Although, of course, she needs to make sure she can repay it or she risks losing her home.

Although for some borrowers, student loan forgiveness may be an option, it does not appear that Erin would qualify for a loan forgiveness program such as the Public Student Loan Forgiveness Program, as she is a contractor at a government agency, not a full-time employee, Miller explains. (See details on Loan Waiver, Cancellation and Redemption Here To see if you might qualify.) But if she watches her budget, she may find extra money to pay off her debt faster; Refinancing at least some of her loans at today’s low rates may make payments more manageable, and a cash-out refi on her home may be another option. Best wishes, Erin!

*Question edited for brevity and clarity.

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