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‘I didn’t want this to be my life.’ I’m 38 and have $208K in student loans. I work a job I hate for $47K a year. How can I dig out of debt?

‘I didn’t want this to be my life.’ I’m 38 and have $208K in student loans. I work a job I hate for $47K a year. How can I dig out of debt?
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Question: I went to college at the age of 38, but I’ve struggled ever since to find a job that I enjoy. I now have over $208,000 in student loans, but only get $47,000 a year. I work a job that I hate, I wake up and hate life daily. While I wanted to go to college, I didn’t want this to be my life – and unless you’re living it, you have no idea what that looks like. Debt weighs me down: I had Chapter 13 bankruptcy years ago and then turned Chapter 7, because I lost my job and only had my husband’s income. I was able to get rid of $40,000 of credit card debt and some medical debt, but I was completely behind on my student loans. I will never be able to buy a house in my name, even though I have some savings. What should I do?

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Answer: The first thing to realize is that you are not alone in experiencing the mental health consequences of debt. In a recent prudential survey of borrowers with $5,000 or more in debt, 42% said student loan debt leads to high levels of emotional and psychological stress — even more than other types of debt. “Financial problems can cause depression and severe emotional stress,” says Grace Young, a certified financial planner at Midtown Financial Group in Houston. “There is nothing wrong with this… Think of talking to a [mental health] A professional to help find your spark and to help cope with your stress. For your financial statements, we asked the experts what you — and others with student loan debt — should consider doing, from loan rehabilitation, to refinancing (see the lowest student loan refinancing rates you can qualify for here), to Loan Forgiveness, To Income – Based Payment Plans And More.

In your case, first, let’s talk about your loan defaults, and what to do about it. For now, collections on your distressed loans, assuming you have federal loans, will likely come to a halt thanks to the COVID-19 relief measures. (The COVID-19 emergency relief for federal student loans is set to expire May 1, 2022.) Mark Kantrowitz, author Who graduates from college? Who doesn’t?, he says it’s worth looking into whether you can rehabilitate these loans, which would erase defaults from your credit history. “Many distressed borrowers will be eligible to rehabilitate their bad loans,” he says. (If your loans remain in default after the collection stop ends, you may be subject to withholding, tax refunds, and collection.)

Here’s how it works: “If the borrower makes 9 out of 10 consecutive, full, voluntary, reasonable and reasonable monthly payments as part of the loan rehabilitation agreement, their loans are rehabilitated and the default is eliminated from their credit history. This is a one-time opportunity, so if the borrower reinstates If you default, he will have no more ability to rehabilitate the loans,” Kantrowitz explains. Note that pending payments that occur during the COVID-19 relief period will likely count toward the nine required payments: “If you have not made, or received credit, the nine required payments by the end of the payment suspension, you must make the remaining payments to complete loan rehabilitation. ‘,” the Ministry of Education explains here. Kantrowitz adds that if you or someone else rehabilitates your loans, you should “either enter into an income-driven repayment plan, which is often required as part of rehab, or get a deferment or endure if you are unemployed or struggling financially.” “

To reduce your monthly loan payments, an income-driven repayment plan is worth considering, as it bases your monthly payment on how much money you earn, so those on lower incomes will have lower payments. However, these are usually only an option with federal loans. “An additional benefit of income-based repayment plans is if the borrower’s loans are included in the Direct Consolidation Loan Program and the borrower is employed full-time in a qualifying public service job…the remaining debt will be forgiven 10 years after repayment.”

Next, it’s important to keep up with your new loan payments, so that it can help increase income or reduce expenses to make it possible to pay off debt. Options for increasing income can include asking for a raise, working overtime, or working part-time in the evenings and weekends. One should also consider selling things that have not been used in over a year,” says Kantrowitz.

Finally, it is not impossible to reopen a bankruptcy case and seek a student loan discharge. “This will require a replay [learn about these here] And the borrower will need to demonstrate undue hardship, which is a strict standard. But when loan payments exceed the borrower’s income, and the borrower does not have reasonable prospects for increasing income and explores other options for dealing with the debt, the borrower may succeed in obtaining full or partial student loan discharge,” Kantrowitz.

Note that a bankruptcy settlement may have tax consequences: If the borrower obtains a Chapter 7 student loan settlement, for example, the amount of the canceled debt is treated as income by the IRS, but if the borrower is insolvent (total debt) exceeding total assets), the IRS may waive all or part of the tax debt, Kantrowitz explains. “If the IRS does not waive the tax debt, there are other options. One is to negotiate an offer of compromise by filing the IRS Form 656,” Kantrowitz says. “The other is to request a payment plan of up to 6 years by filing IRS Form 9465. Because the tax debt is less than the student loan debt that has been forgiven, the repayment plan may be less burdensome than student loan debt.”

While refinancing doesn’t seem like the best option in your case, as it looks like you have federal student loans and likely need an income-based payment plan, it’s an option for those struggling with private student loans, as rates are pretty low right now. (See the lowest student loan refinancing rates you can qualify for here.)

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