I got an email this week from Sharon, a mom who is distraught about her son’s college debt. She was hoping that I had an idea about how he can tackle this debt when he is only working part-time.
I did have a suggestion on how the young college grad can reduce his student debt burden. I thought it would be worthwhile to share the student loan tip with everyone.
First, here is what Sharon wrote:
My son has student loans totaling around $40,000. His Stafford loan is $16,000 and a Sallie Mae private loan is $20,000 and it has a variable interest rate!! He has only been able to find part-time work and is making $9/hr @ 30 hrs/wk. His loan payments are $225 for the private loan and $200 for the Stafford.
I’m a cosigner on the private loan and I only work part-time — 22 hours a week @ $10.00/hr. Sallie Mae won’t help @ all!! Any suggestions??
Here is my response:
I’d suggest that your son temporarily reduce his Stafford loan payments — possibly to $0 a month — by using a new federal income-based repayment program. I wrote a college blog post about this new program for my CBSMoneyWatch blog, entitled:
This program allows college grads to repay their federal student loans based on their salary and not on what they owe. This can be an incredible boon to grads who borrowed far more than their current salary can handle. You can learn more about this opportunity at IBR Income, a nonprofit source of information about the new federal program.
Your son may be able to eliminate his federal Stafford loans until he gets a better job. At the very least, he should be able to drastically reduce the Stafford payments.
If he can skip repaying on his federal loans for awhile, he might be able to free up more money to whittle down the far less desirable private loans, which don’t offer protections. Private lenders don’t care if you are underemployed or unemployed. They just want you to keep repaying your student loans and they will keep badgering you even if you are destitute.