Student Loan Debt Repayment Options

fixing student loan debt

Our family is suffering from my husband's overwhelming student loan debt. He took out a loan for graduate school, and when there were no jobs after graduation, deferred his loan payments then went into forbearance. As a result, his private lender loan with Sallie Mae has not shrunk in the 12 years he has been making payments, now in excess of $450 per month. He is still paying the interest! The lender won't renegotiate the loan.
It is affecting every part of our financial lives. We can't buy a home, my son is about to enter college and we have no savings for him, and it seems we’ll never get out from under this debt, while the lender is making huge amounts of money. Is there anything we can do?  ––Melissa

If it’s any consolation, you’re not alone. Student loan debt has catapulted to over $1 trillion and over 60 percent of this number includes student loans by people over the age of 30; 15 percent is held by people over the age of 50. 

To initially assess the situation, the forbearance means you’re responsible for paying the interest that accrues during that deferment period even though an actual payment wasn’t due during that timeframe. If interest hadn’t been paid on the loan during the deferment, it’s been added to your principal balance which is why it may feel like it’s harder to chip away at the monthly amounts exceeding $450.

Although it’s impacting every part of your financial life, countless people have lifted themselves out of debt and you can, too. The key is whittling away those loans one payment at a time. 

Unfortunately, even if you contact the National Student Loan Data System (NSLDS®) to change from Sallie Mae to another loan servicer, there’s no change regarding the terms of his student loan, so consider these strategies for tackling your debt: 

  1. Start making biweekly payments. Make half a payment every two weeks instead of making one monthly payment. This way, you’ll make 26 payments to the equivalent of 13 monthly payments instead of 12. 
  2. Alter your spending habits. Although you mention purchasing goals of buying a home and the investment towards your son’s college tuition, your spending patterns aren’t clearly outlined. Start with the envelope method and only pay for daily expenses with cash. At the start of the month, withdraw money from your bank account based on your budgeted expenses. Use cash to pay for groceries, gasoline, entertainment and more. When the money runs out, the envelope is empty. Literally. That said, if you have any money left over at the end of the month, you can use it to also pay down the debt. 
  3. Eliminate unnecessary expenses. Perhaps you start with examining your family’s cell phone plans in order to downgrade your data and text services. Then continue to eliminate anything else unnecessary. This means canceling any magazine subscriptions and excess cable plans, or going with basic cable instead. Pack brown bag lunches, rent movies instead of going to the theater and sell unwanted items on eBay. 
  4. Make it a team effort. Can you or your husband get a part-time job on weekends knowing it’s only temporary to get you over this hurdle? 

Additionally, make sure you include the student loan interest deduction on your tax return. It’s an above-the-line deduction of up to $2,500 for the interest paid on qualified federal or private higher education loans. Joint filers must have a modified adjusted gross income in order to qualify that’s less than $125,000.

Stacy Francis is president and CEO of Francis Financial, Inc., a fee-only wealth management practice dedicated to investment advisory services for women, couples and those experiencing divorce. She is also the founder of Savvy Ladies®, a nonprofit organization that educates and empowers women to take control of their finances. 
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