Surviving Student Loans: Avoid Default

When I graduated, I had massive student loans. I was going to school on a medical campus and didn’t graduate. I didn’t have the income that I hoped for and no immediate way of paying off my loan. Add to that the fact that my wife also graduated with student debt and you have a family with a massive burden. 

Since neither of us had work that paid enough for the monthly payments or the financial stability to make the payments to keep our credit healthy, I had to look hard for a solution. I spoke with someone in finance and they told me that it is illegal to go bankrupt on student loans. I had over $100,000 dollars to repay. I also found out that if you fail in your obligations, you can be barred from certain federal careers and other money for the rest of your life. I didn’t want that!

As I researched I came across two helpful ideas: repayment based on my income and consolidating student loans. Combined, these two principals allowed my family to survive student loans.

I found a program called the “income contingent repayment” option, where you can pay a percentage of your income for 25 years and the rest is forgiven. Aside from the fact that the 25th year the part forgiven is counted on income tax, it is a wonderful option! Our payments were calculated to be about $300 per month on the payment calculators.

We still had the problem of having to pay $300 X 2 (once for each of us) for each consolidated loan. To overcome this problem, we considered consolidating student loans into one loan. Loan consolidation under the income contingent repayment option allows us to pay one payment. This is risky for those of you who get a divorce later, but for the rest of us it can save a lot of money.

I found out that it was more likely that we could make the payments if our loans were scooped up and merged into one loan. I had to research for hours about consolidating student loans. 

Overall, this meant that the loan payments (for our income level) came out to $300 per month and we didn’t have to ruin our credit. I hope that this article can help someone out there. As always, do your own research to find out the latest options, but this is something that you may want to look into if you have a lot of school debt and not enough money. Remember that you can only consolidate once in your lifetime, so make it count!