Music Mondays - Help!
Help!
On Friday’s podcast, I am talking to financial literacy expert, Adam Carroll, about his latest project, Broke, Busted and Disgusted, a documentary about the growing problem of student loan debt. There’s currently $1.3 trillion dollars of student loan debt outstanding and those numbers are growing by the day. As a financial planner working with predominantly Gen X and Gen Y clients, I witness firsthand the challenges student loan debt creates in achieving financial goals, managing relationships and achieving personal dreams.There are a handful of fortunate student loan debt holders who graduate with jobs and salaries that make the student loan debt burden manageable and just a minor nuisance; however, I think the majority struggle with paying off their debts while still holding out hope for a future. If you are struggling with student loan debt repayments, I suggest you think of the song Help by the Beatles:
“When I was younger, so much younger than today
I never needed anybody's help in any way
But now these days are gone I'm not so self-assured
Now I find I've changed my mind and opened up the doors
Help me if you can, I'm feeling down
And I do appreciate you being 'round
Help me get my feet back on the ground
Won't you please, please help me?”
A Story of Reaching Out For Help
I recently had drinks with a friend and client of mine who has over $150,000 in student loan debt; and unfortunately this was all racked up during the six years it took her to graduate with her undergraduate degree. Like many students, she and her family didn’t get a great deal of education as far as the long-term impacts of the loans they secured and about half of her loans are private loans.When she finally graduated in 2011, she could only secure a temp job that barely covered her student loan debt payments, which were well over $1,000 a month. She consolidated her federal loans and went on an income based repayment plan; however, the private loans are not as forgiving. It doesn’t matter how much you make, the payments remain the same. As a means of getting some breathing room, she signed up for classes at a local community college so that she could defer her loan payments until she received a higher salary from her employer.At the time of this decision, her student loan debt outstanding was around $120,000; however, because of her deferment, the high interest rates of the private loans and the additional classes, her debt load grew to $150,000. Over this time, though, she has grown professionally and now has a job where she can easily make her debt payments; however, with each payment, she feels as though she isn’t making any progress in lowering her principal outstanding.
“And now my life has changed in oh so many ways
My independence seems to vanish in the haze
But every now and then I feel so insecure
I know that I just need you like I've never done before”
An Offer of Help
She recently had a meeting with her parents where they discussed alternatives to help alleviate her debt burden; and they talked about getting a home equity line of credit on their home to refinance the private student loans. Over drinks, my friend asked me my opinion of this solution; and I told her that if it was a possibility, she should take the help from her parents.My friend was concerned about the burden she was placing on her parents with this home equity line; however, I pointed out to her that her parents were already bearing a heftier burden because they co-signed the private student loans with her. Refinancing this high interest debt would be a great solution for all parties involved.The next weekend, she and her parents went to the bank to apply for the home equity line and they lowered their interest from over 10% to a little over 4%. My friend will continue to pay the same amount she pays every month; however, now she will pay off her loans within 5 years instead of 15 and she will save over $55,000 in interest payments because of this.
Don’t Be Afraid to Ask for Help
If you’re looking for solutions for your student loan debt repayments, I suggest you exhaust all of the traditional avenues first; however, if you hit a wall and you are still struggling, ask for help. I understand the need to take on the burden and responsibility for your debts; however, don’t forget that help is out there and it may not just help you but also the ones you love.If your parents are co-signers on your student loan debt, as much as you may not want to ask for their help, like my friend, asking for help from your co-signers may turn into a winning scenario for all parties. If you’re married and concerned about asking your spouse to help with a repayment alternative, remember that his or her financial future is tied to yours and despite the fact that you want to take responsibility for your own debt, if you can save your family money and heartache, then ask for help.