Ask Stacy: What Can I Do About My Student Loan Debt?

Becky graduated with $126,000 in student loan debt. This is no way to start out in life. What are her options?

Here’s a question from a reader in an all-too-common position these days: drowning in student loan debt.

Hi, Stacy,
I have a little bit of credit card debt, but it isn’t that bad. What really hurts is all the student loans that I have.

Unfortunately for me, I was the first of my siblings to go to college, and so my parents and I were very new to getting financial aid and all of that. I ended up having to pay for almost my entire education with student loans. Now more than half my paycheck goes to paying them off, and I don’t feel like I am making any sort of a dent. I am trying to find the best way to pay them off without going completely broke.

I think my student loan debt is around $126,000 and I have several different companies that I have loans with: The Department of Education, Wells Fargo, AES and ACS. I’ve tried to figure out consolidation on my own, but it is all very confusing. Do you have any tips for me?

I’d appreciate any advice you can offer!

– Becky

From our Solutions Center: Help with student loan debt

I wish Becky’s problem was unique, but she’s definitely got company. Some statistics from a recent Wall Street Journal article:

  • The average debt for this year’s graduates who have student loans is more than $35,000. That’s about twice what it was at the turn of the century.
  • More than 70 percent of those getting bachelor’s degrees this year will have a student loan. Twenty years ago, fewer than half did.
  • According to the Federal Reserve Bank of St. Louis, of those Americans paying down student debt, more than 27 percent are at least a month behind on their payments.

College should improve your life — not ruin it

Before we start on Becky’s question, indulge me while I do a little venting.

While we’re all responsible for the consequences of our actions, I believe part of the blame for the ridiculous level of student loan debt rests with America’s higher education system. College shouldn’t cost so much, and more should be done to educate students and families about avoiding this sort of massive borrowing.

For example, thanks to technology, it’s relatively easy to shave tens of thousands from the cost of college. Online learning is one way. From a 2010 story called College for $1,000 a Year?:

Straighterline is a company that provides college classes online for a tiny fraction of typical college costs – for example, you can take courses for either $99 a month plus $39 per course, or a flat rate of $999 for 10 courses – essentially your entire freshman year. You don’t have to ace Algebra 101 to see the savings: that’s up to 92 percent off what you’d pay on average for a year of college at a public or private institution, and done at your own pace.

I have no idea if these prices are current, but the point is Straighterline is one of several companies that has found a way to profitably exploit a bloated, radically overpriced higher education system. Our nation’s universities incubate much of the technology and innovation that are changing our world. Why can’t they harness some of it to make college more affordable?

From our Solutions Center: Help with student loan debt

The answer is they don’t have to. Because rather than making education more attainable, the current system is geared to making loans more attainable. Uncle Sam and banks profit on the loans, taxpayers provide the guarantees, and students and their parents are led to believe that massive loans are simply part of the college experience.

In a 2012 article from Bloomberg called Student Loans: Debt for Life, Education Secretary Arne Duncan says, “Obviously if you have no debt that’s maybe the best situation, but this is not bad debt to have. In fact, it’s very good debt to have.”

Tell that to Becky, Mr. Duncan.

Our universities should take some of that massive brain power and refocus it on serving students instead of supporting a system that’s obviously collapsing under its own weight. The high cost of higher education is a national disgrace.

That’s my two cents. Now let’s get to Becky’s question.

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  • Nick in Mass

    Student loan debt or any debt for that matter, has to be attacked mercilessly. I got rid of $100k+ of business debt in under 5 years with a second FT job earning just $8/hr. Granted it was tiresome but for me it was the way out of my mess. I used all the money from the second job and as much from my main job as I could knowing the faster I paid the debt, the sooner I could “retire” that extra job. Best wishes and remember….”attack !!!!!”

  • Whitney Nelson

    Hi Becky. Approximately 1/3 of my monthly income goes to my student loans; I have $40,000 less than you do, but I understand the frustration. Like me, it sounds like you have multiple loans across multiple creditors, take some time to figure out exactly how much you owe and to whom (down to the cent). I have 15 loans across six creditors, so I had to use an excel spreadsheet. You should decide what you want concerning your student loans: Do you want to get out of debt fast or do you want lower payments? Consolidation will help lower your payments but will keep you in debt longer. As far as making your income go farther here are some things I did: I lived with my grandmother for 2 years, I got two part-time jobs on top of my full-time job, and used my federal tax refund to make large annual payments.

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