I have $ 200,000 in student loans and have not completed my master’s degree. How to deal with this debt?
Question: I have over $ 200,000 in student loan debt, most of it federally loaned, but a month before completing my master’s degree in public health, I had to temporarily retire due to health issues. My payments are currently on hold, but I don’t know what to do when I need to start paying off the debt. Currently, I work as a therapist for an online counseling provider and earn around $ 35,000 per year. I live in Florida with my ex-boyfriend who is struggling to find work. I know I should finish my masters program, but I’m so sick of being in school, and I’m barely making it already. I told my lender about income-based repayment plans. They suggested that to begin with, I could repay $ 800 per month. My rent is $ 1,250 per month. How am I supposed to live? I have to find a way to pay back the $ 200,000.
Responnse: Initially, paying off $ 200,000 in student loan debt in a profession that pays a median salary of less than $ 50,000 seems like an impossible feat. You already tell the lender about an income-based repayment plan, which is smart, and even still, it seems overwhelming. But there are ways to fix it: We asked professionals what options you and others in a similar situation might consider when paying off student loans, from loan cancellation to loan-based repayment plans. income, etc.
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In your case, one option to consider is whether you qualify for a student loan forgiveness, says student loan expert Mark Kantrowitz, author of several books, including “Who graduated from college? Who doesn’t?. “Many full-time government and non-profit jobs may qualify for loan forgiveness, and some health professions may also qualify (see list of professions with loan forgiveness here). “After 10 years of payments under an income-based repayment plan while working full-time in a qualifying public service job, the remaining debt will be forgiven, tax-free,” Kantrowitz said. Consider applying for such jobs while you are completing your masters degree.
Kantrowitz also notes that getting your degree will make you statistically more likely to pay it back. “This last part of the marathon is the most grueling,” says Anna Helhoski, student loans expert at NerdWallet. “But completing the degree is what makes canceling all the debts worth it.” And when you do, you’ll want to look for a well-paying job (and / or weigh loan forgiveness jobs) and consider other ways to increase your income so you can pay off your debts.
At this point, you might be wondering: Ugh, can’t I just pay off my debts in bankruptcy (the answer: it is possible, but very difficult to do), and what happens what if I don’t repay my loans? If you default, the entire overdue balance of your loan will become immediately due and your wages may be garnished, among other penalties. Although refinancing may be an option for some as the rates are very low at the moment – see the lowest rates you can qualify for here – in your case, you will probably want to keep the income-based repayment plan (federal student loan refinancing may eliminate these types of repayment plans). For the loans you have that are private student loans, refinancing may be a good idea. This guide will help you determine if refinancing is right for you.
So the best option might be to go all the way, complete those final courses, get a degree, and then find a stable job with a high paying job where you can get at least some of your loans canceled. There may not be a fairy godmother who fully repays your debt, but the future is not entirely bleak.
* Letters edited for clarity and conciseness.