I understand how overwhelming this situation must feel for a student, and I am really sorry that you are going through this. Dealing with a $105,000 student loan can be a heavy burden, but there are practical steps you can take to make it more manageable. I want to help break things down for you and show you how to approach it in a way that might feel less stressful.
How can you tackle a $105,000 loan?
Let’s look at the numbers. Let’s assume you are currently earning $40 per hour, which translates to $6,400 per month before your taxes are deducted, that is if you work full – time. This is a good wage, but assuming you are stuck with $1,200 monthly payments on this large loan, it can feel impossible to make progress – especially when your interest keeps adding up. Right now, a significant portion of your payment might be going towards your interest rates which is why you might feel that you are not getting anywhere close to reducing your balance and paying off your loan.
What payment plans are available?
There are repayment plans that can help you manage your student loans more easily. One option you should consider is an Income-Driven Repayment (IDR) Plan. This kind of plan adjusts your monthly payments based on how much you earn, making it easier for you to balance your loan with any other financial needs you may have. Additionally, you need to first find out what type of loan you have, that is, is it a federal or private loan. This will help you to find the best repayment programs available. However, these are some repayment options available:
- Income-Based Repayment (IBR): Your payment will be 10-15% of your discretionary income.
- Pay As You Earn (PAYE): This plan keeps your repayment at 10% of your discretionary income and after 20 years, you will be forgiven of your loans.
- Revised Pay As You Earn (REPAYE): This is similar to the previous one, you still pay 10% of your income but your loan forgiveness may be after 20 or 25 years.
For example, let us assume your discretionary income is about $4,000 after living expenses and taxes are deducted based on what you are currently earning. If you choose the IBR plan, your payment will be $400 per month, which would free up a significant amount of money for you to use for other expenses and lower the financial pressure you are feeling at the moment.
How can you manage interest?
If you are feeling frustrated at the moment because of your interest rates, I completely understand. On large loans like this one, your interest rates can build up quickly and make you feel overwhelmed. That is why you need to look into loan refinancing or consolidation.
Refinancing could possibly allow you to lock in a lower interest rate, especially if you have a solid credit score. Just know that if this loan is a federal loan when you refinance into a private loan, you will miss out on federal repayment plans and loan forgiveness programs.
Let’s also assume, you are currently paying 6% interest rates on your $105,000 student loan, this means you are paying about $525 as interest every month, and the rest of your payment is going toward the principal. This is what is making your loan balance feel stagnant as if you are not getting anywhere because your balance is not reducing as you would expect. However, if you refinance to a 4% interest rate, for example, you could save yourself hundreds of dollars over time and make more progress with each payment, meaning your loan balance will reduce.
Practical steps to reduce your burden
You may not want to get a part-time job all because you want to get more money to pay off your loan. For starters, getting a part time job means extra responsibility, work hours and stress for you, and honestly that feels daunting. However, here are some steps that you can take to help ease your burden:
- Switch to an income-driven repayment plan to lower your monthly payments.
- Consider refinancing if you have a good credit score to lower the interest rate.
- Set up a budget that prioritizes necessary expenses while finding small areas where you can save (even a little extra can go toward the loan).
- Reach out to a financial advisor who specializes in student loans. They can help you understand the best strategies for your specific situation.
What about your mental health?
Any kind of debt can drain a person, not just financially but emotionally. It can take a serious toll on you. You need to reach out to someone – whether a therapist or a trusted friend – you need to reach out to someone who you know can support you through this period. Facing financial struggles can make you feel isolated – like you are alone and no one cares, but you are not alone, look around, there are people who are willing to help you if you let them in on your situation and honestly tell them how you are feeling.
Additionally, know that your future is still full of possibilities, even if it feels like the debt is weighing you down. When you choose the right payment plan – one that works for you considering your financial situation, you will begin to feel more and more in control of your situation. This might take time, but it is not impossible. Remember you do not have to face it alone. You got this.
