Author Topic: Reader Case Study: $180,000 dollars in student debt  (Read 34281 times)

La Bibliotecaria Feroz

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #50 on: June 30, 2014, 09:17:05 PM »
People have made good suggestions--moving in with parents if possible is certainly a great idea.

I don't know anything about your field and won't pretend to, but I will make this observation: The level of your debt is such that it will inflate the importance of your income. If you had no debt, the different between $30K and $50K would be in how long you needed to work and how many luxuries you could let yourself enjoy along the way. With your level of debt, it could be the difference between hanging in there and abject poverty.

If you are really determined to go freelance/entrepreneur, you could look for a job with hours opposite to when it would make sense to do most of your freelancing work (like tending bar at night--or if you are a night owl who does your best work at night, then the early shift at a breakfast restaurant or something). Good luck! Please check back in.

Miaow1

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #51 on: July 01, 2014, 02:05:31 AM »
As a Penn alum my suspicion would be Drexel not Penn. I am basing that on the trimester system. Also Drexel is unbelievably expensive.

YoungInvestor

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #52 on: July 01, 2014, 06:14:51 AM »
If you're making 100$/ month, I'm guessing you're not working more than 5h/month on average. Saying you're building a network and all that is fine and dandy, but really, if you've never had a job, I doubt you can really build much of a network. Right now, if you haven't been able to double that income every month for the last few months (Which you haven't,from your post), what you're doing doesn't work.

Did you spend 4*40-5 = 155 hours looking for jobs in the last month? If not, job hunting is now your full-time job. Feel free to accept any freelancing that you may get, though.

Go ahead and find any job. Then find a second one. Then keep looking for a better one to replace either of them. Then replace the other one. Then that one. Nothing is beneath what you're currently doing

Eventually, you'll be making decent money. Right now, you're bleeding money at a rate of about 2500$/month. Even if you did find a job at 36k, I don't think you could pay for everything.

Being FI at 35 seems almost impossible. Being debt-free at 35 seems like a better objective.

At 180k + scolarships, I assume your university has a career center. Use it.

LibrarIan

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #53 on: July 01, 2014, 06:28:43 AM »
I think we scared the OP away.

Jennifer in Ottawa

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #54 on: July 01, 2014, 06:29:38 AM »
regular posters always this helpful?

This place is about tough love, not handholding and head pats, thus the term 'facepunch'.  Go back and reread the blog.  This place isn't for everyone, and that's ok.

However, hundreds of thousands of people choose this path every year.

Yes, which is why we attempt to facepunch people back to reality.  Massive debt with no means of repayment is just plain stupid.  It is a 'hair on fire' emergency.  Just because everyone around you manacles themselves to debt, drives big dumb cars, finances everything on credit cards, and has a massively negative net worth does not make it normal, or ok, or acceptable in any form.

This is why this place exists.  To wake people the fuck up.  This is a support group for the awakened. 


Good product designers are in high demand, and a good education should open doors for you that aren't available to the "average" applicant. A cursory Google search tells me that the median for PD is closer to $50K, and some sites have an average of $75K. That's more like it.

Are you looking at design jobs that pay well?

If you are going to attempt to help, at least try to get your head out of the clouds yourself.  You don't start at the middle or the top of a salary range fresh out of school.  This person needs cash and they need it now.  Any position that needs a breathing human will do for the time being.

Finally, the most important thing: confidence. You'll never get a $75K position if you're only expecting a $36K one. You have the education and skills, so go out and use them. Even with no work experience, I'm guessing you can find a job that pays above average if you put in the work.

Confidence isn't going to pay the bills and a kid that walks in with the "I'm so special" syndrome is going to have a hard time of it.  She needs a bite of a reality sandwich, not more coddling.

Coddling forums exist somewhere, but not here.
« Last Edit: July 01, 2014, 07:08:56 AM by Jennifer in Ottawa »

Jennifer in Ottawa

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #55 on: July 01, 2014, 06:31:16 AM »
I think we scared the OP away.

Perhaps.  I think the 'FI by 30' thing is the only thing some people see, and just aren't ready for the how and why.

darkadams00

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #56 on: July 01, 2014, 06:35:00 AM »
Whether or not a troll, this was a good thread for my son just starting college to read, if for no other reason than to support our discussions about avoiding student loan debt at all costs. It's good for him to hear even anonymous Internet inputs that are more reasonable than what his friends in high school last year were repeating ad nauseum.

To the OP--my son worked 14 hours yesterday and is working 6/7 days this week as he piles up cash during the summer prepping for college. He works hard, plays hard, loves to socialize, but he's learned over the last year how to approach his friends and social life with respect to his personal and financial goals. If your personal goals allow you to work 20 hours per week doing start-up freelance work, then that's fine. If not, then you need to find out how many hours per week/what kind of job you need annually at $X level of income to meet your goals. Be realistic about your goals. Since you earned a college degree, then the Search function on this site and nearly any respectable finance blog should offer enough examples and advice to figure out the details. Heck, call Dave Ramsey's radio program. He'll give you free, one-on-one advice that works (but it will be similar to what's been said here with a more pointed delivery). Getting out of debt is his forte even if his personal finance advice beyond that is sketchy.

Finally, unless your parents are complete idiots about life and finances, talk to them. If they work or have successfully retired, have demonstrated reasonable decision making skills, own their own home, and overall enjoy a lifestyle that you would like to have, then ask them how they managed. They have a vested interest in your success, especially if you follow everyone's advice here to move back home.

libertarian4321

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #57 on: July 01, 2014, 06:43:10 AM »
I think the OP, while continuing to look for a job in his field (or, better yet, a more lucrative field), should take ANY job, even a part-time job delivering for Pizza Hut.  At least that way he will be earning some money to chip away at the debt (and a couple of nights delivering pizzas or whatever can earn him as much as he makes in a month of "freelancing.")

randymarsh

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #58 on: July 01, 2014, 06:43:16 AM »
I think we scared the OP away.

OP pls respond.

Neustache

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #59 on: July 01, 2014, 06:56:23 AM »
We very well may have driven the OP away...but at least for me, what I posted was out of genuine concern.  It felt like I had more concern for the OP's financial future than the OP did.  He/she needs a wake up call, and even if they don't post again, hopefully this thread helped them realize the seriousness of their situation.

mooreprop

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #60 on: July 01, 2014, 06:59:57 AM »
I think it is possible to pay back this much money, and that you have received some very good advice about how to do this.  It will take some serious planning to make this happen, but it is great that you are thinking about this and have asked for advice.  Lots of "kids" today are putting their heads in the sand and continuing to think that it will "take care of itself" only to find out that they are getting further in debt by the minute.  Choose the path that seems best for you.  I like real estate, so I would use that route to make enough profit to pay off that kind of debt.   

 Outside of the box ideas should be considered.  For example, my daughter and son-in-law are paying off his student loans very quickly (2 years) by renting out rooms in their house.  Perhaps you could rent or buy on contract a very large house and then rent out rooms.  Do you like to travel?  Perhaps you could become a citizen of another country and start over without ever paying back your loans.   I hear Australia is a beautiful place to live.  (I got this idea on a radio program where callers were suggesting solutions to a man with $360,000 in student loans who was earning $60,000 per year.  He was sarcastically writing suicide poems since he saw that as the only way to escape his debt.)

Cpa Cat

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #61 on: July 01, 2014, 07:06:30 AM »
First, let's reframe things a little bit. For anyone who hasn't been to college in the last 10 years, or hasn't been exposed to the world of private universities, $180K in loans is not uncommon if you weren't able to put up money yourself. Heck, places like George Washington U. charge $40K a year in tuition, and that's not even an "elite" school (cue angry alumni). Try any Ivy League or equivalent, and you're in the same ballpark. You can question the wisdom of taking on such loans (valid), or argue we're in an education bubble or that XYZ Community College taught you underwater basketweaving better than Harvard ever could. However, hundreds of thousands of people choose this path every year.

This is a load of garbage. I went for a Masters degree within the last five years. It did cost close to $40k for one year. And guess what? It also had a 99% pre-graduation employment rate for students. That's right. 99% of graduating students had job offers before putting on the cap and gown.

The OP, and many like him/her, went to Pirate School. They robbed her blind and then shot her out, homeless, powerless and broke into the streets. This was a good student. She had scholarships and a fellowship. And $180,000 bought her nothing. Worse than nothing, given the lost time.

But wait! She went to a nice school! It totally taught her the skills she needs to get a lucrative position! It helped her build contacts!

Oh, wait. Nope. I forgot - it was a Pirate School. It prepared her to make as much as a manager at Walmart (which she would probably be by now, if she had gone to work at Walmart instead of Pirate School). It did not help her network. She is on her own, trying to network now. A real school (like Harvard or Generic State School in the Midwest) would have had the whole "networking" thing done while she was there.

"This is how it goes these days" is the crap they tell you when they're stealing your money.
« Last Edit: July 01, 2014, 07:10:30 AM by Cpa Cat »

slugline

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #62 on: July 01, 2014, 07:36:40 AM »
I'd like to think the threadstarter has been too busy earning to continue to follow up.

Mr Mark

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #63 on: July 01, 2014, 07:57:06 AM »




The OP is in big trouble, on several counts.
- most student debt, esp. If government subsidised*, is unreputable. If you are homeless and bankrupt, you still owe the debt. You can't bankrupt your way out. Parents should be careful co-signing notes (don't) because the debt is reclaimable on you, even after premature death of the student!
* ( this forbes article says all student debt)

http://www.forbes.com/sites/moneywisewomen/2012/08/29/3-reasons-to-never-default-on-your-federal-student-loan/

Unfortunately,  the dash to get a degree plus  government subsidised and encouraged student loans, a predatory private loan industry, and a new predatory class of 'Universities' to take advantage of many.... including a background of big fee raises for the real universities, it is a mess. There are payment plan options apparently, income based, so dont panic. This is still a huge debt though, and other readers should not get into such a position. Average student debt is 30k at graduation, btw.






randymarsh

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #64 on: July 01, 2014, 08:01:21 AM »
The OP is in big trouble, on several counts.
- most student debt, esp. If government subsidized*, is unreputable. If you are homeless and bankrupt, you still owe the debt. You can't bankrupt your way out. Parents should be careful co-signing notes (don't) because the debt is reclaimable on you, even after premature death of the student!
* ( this forbes article says all student debt)

The Parent PLUS loan will be discharged upon the student's death or permanent and total disability. Parents cosigning private loans should take out a life insurance policy however.

iris lily

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #65 on: July 01, 2014, 09:17:10 AM »
First, let's reframe things a little bit. For anyone who hasn't been to college in the last 10 years, or hasn't been exposed to the world of private universities, $180K in loans is not uncommon if you weren't able to put up money yourself. Heck, places like George Washington U. charge $40K a year in tuition, and that's not even an "elite" school (cue angry alumni). Try any Ivy League or equivalent, and you're in the same ballpark. You can question the wisdom of taking on such loans (valid), or argue we're in an education bubble or that XYZ Community College taught you underwater basketweaving better than Harvard ever could. However, hundreds of thousands of people choose this path every year.

This is a load of garbage. I went for a Masters degree within the last five years. It did cost close to $40k for one year. And guess what? It also had a 99% pre-graduation employment rate for students. That's right. 99% of graduating students had job offers before putting on the cap and gown.

The OP, and many like him/her, went to Pirate School. They robbed her blind and then shot her out, homeless, powerless and broke into the streets. This was a good student. She had scholarships and a fellowship. And $180,000 bought her nothing. Worse than nothing, given the lost time.

But wait! She went to a nice school! It totally taught her the skills she needs to get a lucrative position! It helped her build contacts!

Oh, wait. Nope. I forgot - it was a Pirate School. It prepared her to make as much as a manager at Walmart (which she would probably be by now, if she had gone to work at Walmart instead of Pirate School). It did not help her network. She is on her own, trying to network now. A real school (like Harvard or Generic State School in the Midwest) would have had the whole "networking" thing done while she was there.

"This is how it goes these days" is the crap they tell you when they're stealing your money.

This is a really good post! Among many good posts here.

"That's how it goes these days" is the same as "But Mom!!!! EVERYONE'S doing it!"

Fishingmn

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #66 on: July 01, 2014, 09:49:23 AM »
If she works in government or as a teacher for up to 10 years she may be able to get some of it cancelled. This may not have been the career path she had in mind but could be a way out of some of that obscene amount of debt.

http://www.studentloanborrowerassistance.org/loan-cancellation/job-related/

nawhite

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #67 on: July 01, 2014, 09:56:32 AM »
My wife and I graduated in 2010 with $180k between the 2 of us. $60k for me and $120k for my wife. We're down to 90k now and will have them all paid off by 2017. But this was with us earning a combined 90k-140k. A couple of recommendations that haven't been mentioned yet, one serious, one semi-serious.

Serious: Get yourself on the Pay As You Earn repayment plan: https://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn. This will limit your total student loan payment to 10% of your income and will forgive the balance at the end of 20 years (note though that you'll end up paying taxes on the forgiven amount so be sure to budget to pay off about 40% of the balance at the end of 20 years). Unfortunately, this will only help with the federal loans. Private loans can get onto income based repayment plans but these may or may not be forgiven in 20 years.

Semi-serious: Get an M.R.S. or a M.R. degree (get married to someone who makes a lot of money). Worked for a number of women I know, only a couple of men though.

nawhite

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #68 on: July 01, 2014, 09:57:44 AM »
If she works in government or as a teacher for up to 10 years she may be able to get some of it cancelled. This may not have been the career path she had in mind but could be a way out of some of that obscene amount of debt.

http://www.studentloanborrowerassistance.org/loan-cancellation/job-related/

That program will only forgive a maximum of $17,500 in debt. The rest you're on your own for.

mozar

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #69 on: July 01, 2014, 12:33:14 PM »
I went to
« Last Edit: May 10, 2018, 11:48:13 AM by mozar »

Tyler

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #70 on: July 01, 2014, 01:10:45 PM »
Assuming the OP is still around, as someone familiar with the product design industry I have some constructive advice.

Based on your description, I'm assuming your PD degree is in the Industrial Design arena.  If not, skip to the next post.  ; )  While I'm a mechanical engineer, I've worked in PD with designers my entire career and know the industry well.  I'd also guess that you have a masters in PD based on the debt load (I know a few others with 6-figure debt that started in fine art and moved to PD in grad school), but a that's neither here nor there.  Your primary goal is to get a job.

The thing with PD is that it's a fickle field concentrated in a few major cities, and frankly Philly isn't one of them.  So to expand your options, you need to look in the PD hotbeds of Silicon Valley, Chicago, Boston, New York, and (to a lesser extent) Austin.  There are simply far more jobs in these places than anywhere else in your field.  So get on Core77 to research design firms & Coroflot to browse job listings, and be willing to move if you have to.  Your German fluency also struck a chord, as there are a few companies with offices in Germany that may particularly value this.  So use that to your advantage.  And with the woodworking skills, you may even look at model shops or manufacturing companies -- my wife works at a 3D printing company where they hire art majors (sculptors) to do hand finishing work.

I'd also recommend applying for internships.  Even if they don't pay that well, they're highly looked at in the design field by hiring managers and will both pad your resume and also help get your foot in the door.  Make sure you stay on top of CAD software -- especially Solidworks and/or Alias.  These days, if you're not fluent in surfacing, you're at a major disadvantage.  And of course, always keep improving your portfolio and sketching skills wherever possible. 

Hope that helps.  The debt sucks, but what's done is done.  Getting a real PD job will go a long way to getting you on your feet.
« Last Edit: July 01, 2014, 01:19:26 PM by Tyler »

lum8re

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #71 on: July 01, 2014, 02:39:44 PM »
My fiance is was in a similar situation. She had over 230k in student loans when she graduated from law school.

Her student loan monthly payments were originally 2,600 a month.

Due to there being a large number of lawyers in our area and few jobs, she went mostly jobless for 6 months, working part-time at a coffee shop and eating through most of her savings.  She finally landed a job for around 50k in the public sector, non legal but a job with a decent salary.  Even after finding her new job, she was still spending nearly her entire salary after taxes on her loans.

Two programs helped lower the payments and have created a plan for how she can avoid paying a majority of the high interest fees.  While she had about 25k in private loans, majority were fed loans that we consolidated and enrolled in the two programs below.  Her fed loan payment dropped from $2,400 a month to around $500.

1)The IBR (Income Based Repayment) program limits the maximum they can take from you for federal loans to 15% of your earnings after taxes.  If you earn below 150% of the poverty level, your loans are reduced to $0 a month.  The first 3 years while your in the IBR, any extra interest in addtion to your payments is paid by the federal government, meaning your loans while maybe your not even paying enough to cover the interest, will not increase the first 3 years of the IBR.  After 3 years, loan interest will accrue normally. This is only for federal loans and certain plus loans, not valid for private loans.

2)PSLF, the public service loan forgiveness program will forgive all debt remaining after 10 years of public service, working for nonprofits, fed, state, local or tribal government employees, including military or schools\colleges, or service full-time in AmeriCorps or PeaceCorps. This also is only for federal loans and certain plus loans, not valid for private loans. The best part about this program is that the payoff for the loans is not taxable.  So there is no tax burden to the repayment of loans unlike the normal loan forgiveness, (25 year program)  This program requires you be either standard repayment plan or IBR.

Good luck!

http://www.ibrinfo.org/what.vp.html




happyfeet

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #72 on: July 01, 2014, 03:37:55 PM »
I just do not understand that type of debt - why a person would ever take that on unless they had high income potential like a doctor.  Why would a parent allow their kid to assume that much debt?  It is almost criminal what these colleges can do.  They take your money and lots of it  from 18 year old kids - you get nothing but a piece of paper in many cases is not worth a whole lot in the job market.

You can get a great education for a fraction of what OP spent. As a parent I would never OK my kid assuming that kind of debt.

DD has a great job - $70,000 - and to purchase a home for $140,000 with 10% down -the hoops she had to jump through!  Like the bank wanted her company to write a letter and state she got the job on her own merits(she did) not because her dad worked there(he does - he got her the connection though). The company would not do that BTW.  And yet, hundreds of thousands of dollars are readily loaned to kids who will not be able to repay/struggle to repay.
Boggles my mind. 

I wish you the best OP.  Get a couple of jobs - live at home and pay off that debt. It is going to take you a while.

nawhite

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #73 on: July 01, 2014, 03:39:48 PM »
If she works in government or as a teacher for up to 10 years she may be able to get some of it cancelled. This may not have been the career path she had in mind but could be a way out of some of that obscene amount of debt.

http://www.studentloanborrowerassistance.org/loan-cancellation/job-related/

That program will only forgive a maximum of $17,500 in debt. The rest you're on your own for.
I've never heard this and a quick google make it look like it is currently not capped but there is a proposal to cap it at $57,500 (would apply to new borrowers only?).
Not that I think this is the way to go but just want to make sure correct info is out there

I stand corrected. The $17,500 only applies to STEM and Special Ed teachers in the Teacher Loan Forgiveness program (its $5500 for all other teachers). Be aware though that a student will still have to pay taxes on the full forgiven amount of the loans in the year they are forgiven. So even if you have $200k in debt forgiven, you'll still owe about ~$80k in taxes. The forgiveness programs can be double edged swords because they can cause your balance to go up by allowing you to not pay enough to cover the interest and then still hit you with a tax bill at the end. Be careful.

nawhite

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #74 on: July 01, 2014, 03:46:37 PM »
I just do not understand that type of debt - why a person would ever take that on unless they had high income potential like a doctor.  Why would a parent allow their kid to assume that much debt?  It is almost criminal what these colleges can do.  They take your money and lots of it  from 18 year old kids - you get nothing but a piece of paper in many cases is not worth a whole lot in the job market.

You can get a great education for a fraction of what OP spent. As a parent I would never OK my kid assuming that kind of debt.

It's an education thing. My wife's parents didn't have an expansive financial education like most people on this site. Because they didn't know what $120k in debt would do to someone making $30k per year, they didn't know that they should say anything when their daughter got into a school that charged 40k/year even though they couldn't help her pay for it. To them, they were just so excited their daughter got into a great school and they wanted the best for her, so they only said "here let me co-sign that for you."

They aren't dumb people at all. They just didn't know what debt like that does. These cases present the best case for financial education in schools that I know of.

YoungInvestor

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #75 on: July 01, 2014, 04:10:09 PM »
I just do not understand that type of debt - why a person would ever take that on unless they had high income potential like a doctor.  Why would a parent allow their kid to assume that much debt?  It is almost criminal what these colleges can do.  They take your money and lots of it  from 18 year old kids - you get nothing but a piece of paper in many cases is not worth a whole lot in the job market.

You can get a great education for a fraction of what OP spent. As a parent I would never OK my kid assuming that kind of debt.

It's an education thing. My wife's parents didn't have an expansive financial education like most people on this site. Because they didn't know what $120k in debt would do to someone making $30k per year, they didn't know that they should say anything when their daughter got into a school that charged 40k/year even though they couldn't help her pay for it. To them, they were just so excited their daughter got into a great school and they wanted the best for her, so they only said "here let me co-sign that for you."

They aren't dumb people at all. They just didn't know what debt like that does. These cases present the best case for financial education in schools that I know of.

I really don't like when people use ignorance as an excuse. If you sign your name on a 6-digits loan without "knowing what debt like that does", whatever happens next is on you.

Grateful Stache

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #76 on: July 01, 2014, 04:19:55 PM »
Be aware though that a student will still have to pay taxes on the full forgiven amount of the loans in the year they are forgiven. So even if you have $200k in debt forgiven, you'll still owe about ~$80k in taxes.

The amount of loan forgiven under the Public Service Loan Forgiveness program is not taxable by the IRS.

P.S. Good luck, OP! And congratulations on your recent graduation! There is plenty of time to work things out.

Cheers.
« Last Edit: July 01, 2014, 07:31:18 PM by Grateful Stache »

Jags4186

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #77 on: July 01, 2014, 05:21:25 PM »
Perhaps move to another country permanently, try to gain citizenship there, renounce your US citizenship, and stop paying on the loans?

On a more serious note, my SO paid off $50k in SL debts making $35k/yr in 2 years living at home with her parents.  I hope you have parents who are willing to pay all your *must be modest* living expenses and all income you have goes towards your debt.  Hopefully you'll get raises and you can knock this out in 7-10 years.

Best of luck.
« Last Edit: July 01, 2014, 05:25:03 PM by Jags4186 »

mxt0133

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #78 on: July 01, 2014, 05:31:23 PM »
And yet, hundreds of thousands of dollars are readily loaned to kids who will not be able to repay/struggle to repay.
Boggles my mind.

Then only reason private companies will loan someone hundreds of thousands of dollars is because the loan cannot be discharged, even trough bankrupcy, and they are partially counting on penalties and fees to improve their ROI.  It shouldn't boggle your mind if you follow who profits from this situation.

parsimonious

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #79 on: July 01, 2014, 05:47:33 PM »
My fiance is was in a similar situation. She had over 230k in student loans when she graduated from law school.

Her student loan monthly payments were originally 2,600 a month.

Due to there being a large number of lawyers in our area and few jobs, she went mostly jobless for 6 months, working part-time at a coffee shop and eating through most of her savings.  She finally landed a job for around 50k in the public sector, non legal but a job with a decent salary.  Even after finding her new job, she was still spending nearly her entire salary after taxes on her loans.

Two programs helped lower the payments and have created a plan for how she can avoid paying a majority of the high interest fees.  While she had about 25k in private loans, majority were fed loans that we consolidated and enrolled in the two programs below.  Her fed loan payment dropped from $2,400 a month to around $500.


In scenarios like this do you delay (official legal) marriage until IBR is done? If you two get married, won't the payment skyrocket?

slugline

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #80 on: July 01, 2014, 05:54:15 PM »
And yet, hundreds of thousands of dollars are readily loaned to kids who will not be able to repay/struggle to repay.
Boggles my mind.

Then only reason private companies will loan someone hundreds of thousands of dollars is because the loan cannot be discharged, even trough bankrupcy, and they are partially counting on penalties and fees to improve their ROI.  It shouldn't boggle your mind if you follow who profits from this situation.

In the quote you truncated, happyfeet was trying to draw a contrast with a daughter's struggle to get mortgage approval on a really affordable home . . . a home that could be actually foreclosed upon, unlike a diploma. It is boggling.

Mr Mark

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #81 on: July 01, 2014, 08:36:06 PM »
A cautionary tale.

Red Beard

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #82 on: July 01, 2014, 09:23:10 PM »
In these types of situations I immediately jump into the "what would I do if it were me?" thought pattern.  My first thought is the public service repayment option that has been discussed here. Ten years is a long time to do something I presumably have no interest in, so I would try to find an option that would minimize the time I spent outside of my desired field. The best option I can think of at the moment would be oil fields - either in North Dakota or West Texas - where you could earn six figures, sock away money like crazy and realistically be out of debt in 3-4 years, leaving you the freedom to pursue a career you would enjoy debt free. It would disrupt your life, sure, but not nearly as much as being buried in debt forever will.

Best of luck!

PenTeller

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #83 on: July 02, 2014, 11:56:05 AM »
My fiance is was in a similar situation. She had over 230k in student loans when she graduated from law school.

Her student loan monthly payments were originally 2,600 a month.

Due to there being a large number of lawyers in our area and few jobs, she went mostly jobless for 6 months, working part-time at a coffee shop and eating through most of her savings.  She finally landed a job for around 50k in the public sector, non legal but a job with a decent salary.  Even after finding her new job, she was still spending nearly her entire salary after taxes on her loans.

Two programs helped lower the payments and have created a plan for how she can avoid paying a majority of the high interest fees.  While she had about 25k in private loans, majority were fed loans that we consolidated and enrolled in the two programs below.  Her fed loan payment dropped from $2,400 a month to around $500.


In scenarios like this do you delay (official legal) marriage until IBR is done? If you two get married, won't the payment skyrocket?

IBR does not take into account the spouse's income, but they do require the borrower to reapply yearly for the program.

Trudie

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #84 on: July 02, 2014, 12:25:51 PM »
Sorry this thread can be brutal, but your debt is an emergency and you need to act accordingly.

My advice:
(1)  Move home.  You cannot afford a place of your own.
(2)  Try to get on your parents' health insurance until you are 26, then will need to find your own under the ACA.
(3)  Find a decent job -- including one outside of your field -- that pays good money.  Your goal is to maximize income.  This may mean that you have to plug your nose and jump in.  Accept that it is temporary.
(4)  No car, period... walk, bike, take public transportation everywhere.
(5)  You need to develop your artistic talents on the side, doing side hustle jobs -- photography for special events, freelance design work.  You should plan on working several nights and weekends the next few years.
(6)  I don't know if they could help you, but you should check with a non-profit debt consolidation service to see if you have an options with your loans to consolidate and get them under control.

4alpacas

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #85 on: July 02, 2014, 12:44:50 PM »
My fiance is was in a similar situation. She had over 230k in student loans when she graduated from law school.

Her student loan monthly payments were originally 2,600 a month.

Due to there being a large number of lawyers in our area and few jobs, she went mostly jobless for 6 months, working part-time at a coffee shop and eating through most of her savings.  She finally landed a job for around 50k in the public sector, non legal but a job with a decent salary.  Even after finding her new job, she was still spending nearly her entire salary after taxes on her loans.

Two programs helped lower the payments and have created a plan for how she can avoid paying a majority of the high interest fees.  While she had about 25k in private loans, majority were fed loans that we consolidated and enrolled in the two programs below.  Her fed loan payment dropped from $2,400 a month to around $500.


In scenarios like this do you delay (official legal) marriage until IBR is done? If you two get married, won't the payment skyrocket?

IBR does not take into account the spouse's income, but they do require the borrower to reapply yearly for the program.
IBR does include a spouse's income.  (https://studentaid.ed.gov/sites/default/files/income-based-repayment-q-and-a.pdf under Married Borrowers section)

If you are married and file a joint federal tax return, your eligibility for IBR will be determined based on
your joint income and the amount of your eligible loans. 

And if you do choose to file separately, there are a lot of drawbacks (http://taxes.about.com/od/filingstatus/qt/marriedseparate.htm). 

frugalnacho

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #86 on: July 02, 2014, 12:48:10 PM »
First, let's reframe things a little bit. For anyone who hasn't been to college in the last 10 years, or hasn't been exposed to the world of private universities, $180K in loans is not uncommon if you weren't able to put up money yourself. Heck, places like George Washington U. charge $40K a year in tuition, and that's not even an "elite" school (cue angry alumni). Try any Ivy League or equivalent, and you're in the same ballpark. You can question the wisdom of taking on such loans (valid), or argue we're in an education bubble or that XYZ Community College taught you underwater basketweaving better than Harvard ever could. However, hundreds of thousands of people choose this path every year.

This is a load of garbage. I went for a Masters degree within the last five years. It did cost close to $40k for one year. And guess what? It also had a 99% pre-graduation employment rate for students. That's right. 99% of graduating students had job offers before putting on the cap and gown.

The OP, and many like him/her, went to Pirate School. They robbed her blind and then shot her out, homeless, powerless and broke into the streets. This was a good student. She had scholarships and a fellowship. And $180,000 bought her nothing. Worse than nothing, given the lost time.

But wait! She went to a nice school! It totally taught her the skills she needs to get a lucrative position! It helped her build contacts!

Oh, wait. Nope. I forgot - it was a Pirate School. It prepared her to make as much as a manager at Walmart (which she would probably be by now, if she had gone to work at Walmart instead of Pirate School). It did not help her network. She is on her own, trying to network now. A real school (like Harvard or Generic State School in the Midwest) would have had the whole "networking" thing done while she was there.

"This is how it goes these days" is the crap they tell you when they're stealing your money.

If they ever come up with a swashbuckling school, I think one of the courses should be Laughing, Then Jumping Off Something.

-Jack Handey

frugalnacho

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #87 on: July 02, 2014, 12:51:25 PM »
I just do not understand that type of debt - why a person would ever take that on unless they had high income potential like a doctor.  Why would a parent allow their kid to assume that much debt?  It is almost criminal what these colleges can do.  They take your money and lots of it  from 18 year old kids - you get nothing but a piece of paper in many cases is not worth a whole lot in the job market.

You can get a great education for a fraction of what OP spent. As a parent I would never OK my kid assuming that kind of debt.

It's an education thing. My wife's parents didn't have an expansive financial education like most people on this site. Because they didn't know what $120k in debt would do to someone making $30k per year, they didn't know that they should say anything when their daughter got into a school that charged 40k/year even though they couldn't help her pay for it. To them, they were just so excited their daughter got into a great school and they wanted the best for her, so they only said "here let me co-sign that for you."

They aren't dumb people at all. They just didn't know what debt like that does. These cases present the best case for financial education in schools that I know of.

Uh, what's not to get? You borrow a fuck ton of money, you pay a fuck ton of money back.  It can't get any fucking simpler.

Angie55

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #88 on: July 02, 2014, 12:57:07 PM »
Its not that obvious to the regular 16/17 year old. Most schools don't teach accounting in High School instead you learn various levels of geometry/calculus without any practical use. Add on a typical middle class family with parents that save a little but otherwise spends most of their salary. Its not so obvious anymore...

Most people are kids when they take out student loans. Want everyone to rail on the dumb decisions you made as a kid?

frugalnacho

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #89 on: July 02, 2014, 01:12:59 PM »
Its not that obvious to the regular 16/17 year old. Most schools don't teach accounting in High School instead you learn various levels of geometry/calculus without any practical use. Add on a typical middle class family with parents that save a little but otherwise spends most of their salary. Its not so obvious anymore...

Most people are kids when they take out student loans. Want everyone to rail on the dumb decisions you made as a kid?

What kind of high school did you go to that they didn't teach you basic arithmetic?  And yes it is painfully obvious that taking on such massive debt is a bad idea. 

Doomspark

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #90 on: July 02, 2014, 01:40:03 PM »
My high-school didn't teach me how to THINK or how to apply what I was being "taught" to real life situations.  It taught me how to memorize answers and spew them out on tests. 

rmendpara

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #91 on: July 02, 2014, 02:01:21 PM »
I just do not understand that type of debt - why a person would ever take that on unless they had high income potential like a doctor.  Why would a parent allow their kid to assume that much debt?  It is almost criminal what these colleges can do.  They take your money and lots of it  from 18 year old kids - you get nothing but a piece of paper in many cases is not worth a whole lot in the job market.

You can get a great education for a fraction of what OP spent. As a parent I would never OK my kid assuming that kind of debt.

It's an education thing. My wife's parents didn't have an expansive financial education like most people on this site. Because they didn't know what $120k in debt would do to someone making $30k per year, they didn't know that they should say anything when their daughter got into a school that charged 40k/year even though they couldn't help her pay for it. To them, they were just so excited their daughter got into a great school and they wanted the best for her, so they only said "here let me co-sign that for you."

They aren't dumb people at all. They just didn't know what debt like that does. These cases present the best case for financial education in schools that I know of.

Uh, what's not to get? You borrow a fuck ton of money, you pay a fuck ton of money back.  It can't get any fucking simpler.

Hahahha, best analogy ever! +1,000,000

totoro

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #92 on: July 02, 2014, 03:05:27 PM »
You forget the effects of denial and magical thinking.  At play is lack of experience with real consequences to temper magical beliefs such as:

1. education always pays off
2. it is always better to be a homeowner than a renter
3. you are judged on your car so it is worth it to have a nice one
4. clothing makes the wo/man
5. interest charges don't get counted in the cost

Sometimes the math part is not obvious. Like compound interest on student loans which is not clearly pointed out in understandable numbers when a student who has never paid for anything themselves takes them on.

I can see how someone who is not thinking about it carefully can get into some trouble they did not expect with student loans, although this example is pretty extreme.

BayIslandSaver

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #93 on: July 02, 2014, 03:35:59 PM »
I agree a cautionary tale.  There are probably thousands of young adults facing similar situations with the OP.
What's to happen if they can't pay their debts?  Are we stuck with a generation of homeless able-bodied adults?

Glad I stayed in-state and got out with my piece of paper debt free.
DW had close to six-figures in debt, but luckily I found this site during that period (2012) and paid it off in 2 yrs. by tracking every penny and throwing everything else at the nasty beast that is private student loans of variable nastiness (interest).

happyfeet

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #94 on: July 02, 2014, 04:06:29 PM »
I agree a cautionary tale.  There are probably thousands of young adults facing similar situations with the OP.
What's to happen if they can't pay their debts?  Are we stuck with a generation of homeless able-bodied adults?

I wonder this too.  DD ex had $60,000 + in student loans.  We kept getting the you are not paying letters for his debt.  I finally opened them to call the creditors and saw the amount.  What happens to these kids?  The interest keeps building and debt keeps climbing.  They garnish your SS?  Then what?

randymarsh

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #95 on: July 02, 2014, 04:23:50 PM »
I agree a cautionary tale.  There are probably thousands of young adults facing similar situations with the OP.
What's to happen if they can't pay their debts?  Are we stuck with a generation of homeless able-bodied adults?
I wonder this too.  DD ex had $60,000 + in student loans.  We kept getting the you are not paying letters for his debt.  I finally opened them to call the creditors and saw the amount.  What happens to these kids?  The interest keeps building and debt keeps climbing.  They garnish your SS?  Then what?

You enter default, your credit score will be trashed. Wage garnishment will happen without a court order ((administrative garnishment they call it). Tax refunds will be applied to the debt. SS is garnished (limited to 15% I believe). The worst thing is that you can have professional licenses suspended: law, CPA, medical. That could cause a problem for a very small number of people.

If the federal loan default rate rises too much, I would't be surprised if they add penalties like no passport renewal. More likely, I think they'll continue to come up with these payment plans that push the fallout 20+ years into the future.
« Last Edit: July 02, 2014, 05:51:37 PM by thefinancialstudent »

Cpa Cat

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #96 on: July 02, 2014, 04:27:32 PM »
In these types of situations I immediately jump into the "what would I do if it were me?" thought pattern.  My first thought is the public service repayment option that has been discussed here. Ten years is a long time to do something I presumably have no interest in, so I would try to find an option that would minimize the time I spent outside of my desired field. The best option I can think of at the moment would be oil fields - either in North Dakota or West Texas - where you could earn six figures, sock away money like crazy and realistically be out of debt in 3-4 years, leaving you the freedom to pursue a career you would enjoy debt free. It would disrupt your life, sure, but not nearly as much as being buried in debt forever will.

Best of luck!

I want to second this. A lot changes in 10 years. A mind-boggling amount can change in 25 years. With either IBR or Public Service Forgiveness, you're locking yourself into a lengthy debt-repayment scheme (10 years for Public Service and 25 years for IBR). The most reasonable solution to paying off 180k in debt is to make 180k as quickly as possible and paying it off.

In ten years, I have changed my career twice, gotten married, emigrated from my country of origin, moved a bunch of times, etc. Do you really want to be 5 years into a Public Service scheme when you decide you'd like to stay home with your baby? Or when an opportunity for an awesome job presents itself in Europe? Or when your spouse needs to move for his/her career? Or when you get sick and need to take some time off work?

Even if you only ever get a job with a salary of $36k and never get a raise or make another penny, you could  pay this off in 10 years without any loan forgiveness - just by living frugally and chucking every penny at it. It's not worth it to lock your life down into some 10-year (or 25 year) plan for forgiveness.

YoungInvestor

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #97 on: July 02, 2014, 08:41:41 PM »

At this point, does it matter much whether the debt is 180K or 250K?   They are all crazy high video game numbers at this point, and you need to find a way to create a crazy high video revenue stream for yourself.


Plenty of people here made more than 180k in a relatively short time. These are not crazy high video game numbers. With a 50-60k net job, which the OP should have relatively soon, I can see it being paid in 5 years or less, with raises, bonuses, etc. Especially if he lives with his parents for some time.

capital

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #98 on: July 04, 2014, 06:06:43 PM »
The thing with PD is that it's a fickle field concentrated in a few major cities, and frankly Philly isn't one of them.  So to expand your options, you need to look in the PD hotbeds of Silicon Valley, Chicago, Boston, New York, and (to a lesser extent) Austin.  There are simply far more jobs in these places than anywhere else in your field.
If that's the case, the target should be ChicagoŚ it has a significantly lower cost-of-living than any of the alternatives, except maybe Austin. But it's much harder to be carfree in Austin that Chicago, by my understanding.

Frugal Father

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Re: Reader Case Study: $180,000 dollars in student debt
« Reply #99 on: July 06, 2014, 05:38:25 PM »
The thing with PD is that it's a fickle field concentrated in a few major cities, and frankly Philly isn't one of them.  So to expand your options, you need to look in the PD hotbeds of Silicon Valley, Chicago, Boston, New York, and (to a lesser extent) Austin.  There are simply far more jobs in these places than anywhere else in your field.
If that's the case, the target should be ChicagoŚ it has a significantly lower cost-of-living than any of the alternatives, except maybe Austin. But it's much harder to be carfree in Austin that Chicago, by my understanding.
I've been on Chicago for the last year and the public transportation has been excellent.