Financial Planning for Generation X & Y Women
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Expert Q&A Archive

What to do when drowning in Student debt?
I need some advice on my student loans. I graduated from grad school in August of 2008. During my 8 years of undergrad and grad school, I took out 3 student loans. I have a government loan which I believe the balance is about $19,000 and 2 other loans: a Citibank loan which is about $19,000 and a Sallie Mae loan which is about $126,000.00. My payments each month for all 3 loans is about $1,100. I also have a medical bill of $12,000, a monthly car loan of $350.00, and 5 credit cards -each with a balance of $2000.00. I feel like I'm drowning in debt. I'm currently making $40,800 a year before taxes. What can I do to lower my monthly balance and get out of this debt?
Heather Green:
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You may be able to negotiate a forbearance agreement with your student loan providers where you have a reduced payment based on your income. You may also be able to consolidate your student loans where you would have a longer period of time to pay them off, and potentially reduced payments. You can check out the following website:

Also, it's possible a debt management program may help you by reducing your interest rates and minimum payments necessary to your other creditors. Whether or not a debt management program can help you can be determined by a credit counselor. You can find a credit counselor by contacting the Consumer Credit Counseling Service (CCCS) agency near you. Go to and click on "Find a Counselor," if you don't know where your nearest CCCS is. Good luck.
Gail V. Marquet:
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Here are my suggestions for reducing your debt

1 - Sell your car and buy a very inexpensive car that you can pay cash for ($1500 - $2000). That will free up $350/month.
2 - List your credit cards, smallest to largest balance, and put every extra cent into paying them off in that order. Close the credit cards and only use cash to pay for things.
3 - After the credit cards are paid off, attack the medical bill.
4 - Selling the car and paying off the credit cards should ease the student loan payment for you.
5 - After paying off the medical bill, use all your cash to pay extra on these student loans until they are paid off.
6 - If you decide you need further education to advance your career, save up and pay cash for it. Don't go into student loan debt again.
Pablo M. Bianchi, CFP:
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Unfortunately there is not much you can do other than continue to survive. It is my opinion that this is what happens when you start spending without a plan or budget. My first suggestion is to begin working at creating a budget. Second, realize that you did not get to this position overnight; so therefore it is going to take you a while to get out of it. You need [to] exercise patience and discipline.
Frank Wells:
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There are many options, depending on your job position, housing, ability to combine student loans, possible deferment of the loans for a short time, transportation options, budgeting, etc.
Kris Freeberg:
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Even if you didn't have all of that debt, knowing what I know about average living expenses from having written hundreds of budgets, I'd say you need to increase your income just to adequately fund savings for future goals. So increasing income appears inevitable to me. You might as well embrace the challenge and go for it.
Karen Bolaji Fisher:
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Please do not despair. I was not in your exact situation, but after graduating college I had difficulty making the monthly payments on my student loans. I would tackle the government loans first, as there are a few repayment options that are offered by Sallie Mae. Check out the Sallie Mae website, On the repayment plan page, there are two extended payment plan options, and I think the extended plan might suit your current financial situation since you might only have to pay the interest until your financial position improves. As for the balances with private lenders, either contact the banks directly to work out an appropriate payment [plan] or work with a credit counseling agency to develop a practical payment plan.
Michael A. Masiello:
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At the risk of offending or sounding cold and harsh--neither is the intent, but here goes--you need to get immediate help! Contact a Credit Counseling Center. [They are] not for profit and [provide] legitimate help. If my math is accurate I count more than $188,000 in debt. Stop now. Use cash only. If it feels like you are drowning it's because you are. By the way, more than four times salary in debt is an absolute disaster.
Bettye J. Banks:
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You DO have a large amount of debt, but you also have hope. First, one of the best uses of your credit dollar is to acquire a good education, and you have done that, which makes this a little easier.

(1) I would look into combining your student loans into a single loan which could lower those payments. Contact Sallie Mae and ask about programs to help you. [Sallie Mae website:] You are looking at very long-term debt, but you should have a plan to repay it expeditiously. An education is forever, and you can pay off debt.

(2) Over time, you can expect your income to grow. As income increases, DO NOT acquire more debt than you can service effectively. If you cannot afford it, don't buy it! Use any additional income to pay down debt.

(3) Contact a National Foundation for Credit Counseling (NFCC)-affiliated credit counseling agency for [the name of] a counseling service near you. Contact one through [the NFCC website, or] (800) 388-CCCS (2227). Many agencies also offer telephone counseling. They can help you get a handle on your money through counseling, education, and if properly indicated, a Debt Management Program (DMP). A DMP can help you devise a plan to service the credit card and medical debts in an orderly manner.

(4) If you have had your car for a while, you may also be able to refinance it. It is very difficult to refinance a car loan at either end of a contract. (When the loan is too new or within a few months of paying it off.) If you are about halfway [through] your contract, it might be easier to refinance. So explore that option as well.

A bankruptcy probably wouldn't help you very much, because the bulk of your debt is federal, which, generally, you cannot discharge in a bankruptcy.
Nancy Granovsky, CFP:
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The responses from the other Wi$eUp experts should prove helpful. Certainly your capacity to pay down debt has been enhanced by investing in your own education. You may wish to visit the Utah State University Extension website-- see the impact in dollars and cents of various debt pay down strategies; however, even this will not be a substitute for seeking assistance and information from your creditors and/or a credit counseling service. Closing your credit cards will have an adverse impact on your credit score. You may wish to consider keeping them, but STOP using them.