How can this graduate deal with too much student loan debt?

How student can face a mountain of debtIn a recent post in our Money College series, Fruzsina Eordogh described her personal financial crisis brought about by excessive college debt -- especially private student loans.

According to Eordogh, she borrowed $43,000 from Sallie Mae with an average interest rate of 9.5%. She has already accrued $23,000 in interest. She will have to make monthly payments of $690 for 14 years and 11 months before she is debt free.

In a weak job market, her problems are compounded. WalletPop editors asked me to offer some ideas for how Ms. Eordogh can improve her situation, and here's the bad news: It will not be easy at all. Student loans are the herpes of personal finance: nearly impossible to get of. They are not dischargeable in bankruptcy and, if she misses payments, she could end up in default and owe far, far more money.

Here's the bottom line: if Fruzsina is to have a prayer of a financial life in 15 years, she absolutely must find a way to sock away $690/month to make every single payment without ever being late. Plenty of financial aid experts will suggest that she talk to her lenders about getting a hardship deferment: make no payments while the interest continues to add up. The problem with that idea in her situation is that the interest rates are so high that once she starts playing that game, her debt hole will grow exponentially larger and she'll never get out of it. Here are some other ideas:
  • Live rent-free. $690 is about the cost of rent in many areas. So if she doesn't have to pay rent, she just may be able to come up with the cash to pay her loans. If Fruzsina can get a gig as a nanny or companion to an elderly or disabled person that included free rent but also allows her to work her day job, she could be well on her way to a brighter financial future.
  • Private Student Loan Forgiveness. Working as a teacher or joining the military may offer some possibilities for student loan forgiveness and/or employer-provided help with student loans. But be careful: Many loan forgiveness programs only help with federal loans, which are only a fraction of her overall debt load.
  • Consolidate? Consolidating private loans is not the cookie-cutter process that consolidating federal loans is. But if you have a good credit score, it may be possible to lower your rate by consolidating private loans, which could in turn lower your monthly payments and the total amount that you'll end up paying. Check for information on private loan consolidation.
  • Work all the time: Given her dire financial situation, Fruzsina is going to have at least a few years of misery before her income hopefully rises enough to afford the payments on her student loans. On top of a hopefully 9-5 job and perhaps a gig as a nanny or companion, she will also want to look for other streams of income. She wrote that she was an English major -- freelancing copywriting? It might be worth looking at a site like for opportunities that will allow her to make money writing now. If worst comes to worst, a job at a restaurant or Walmart could put some cash in her pocket.
  • Spend No Money! Does she have cable? Cancel it. She probably won't be able to eat at restaurants, drink bottled water, buy clothing new, or subscribe to a magazine for several years -- if she's serious about cleaning up this mess and putting yourself on a path toward solvency.
The real tragedy of this story is that Fruzsina is not some irresponsible spendthrift who bought a house with an extra bathroom to impress her friends. She thought -- and was probably told by guidance counselors, admissions officers, financial aid workers and bank employees -- that borrowing heavily to go to a private college was an investment that would pay off. There was no way that monthly student loan obligations of $690 would end anywhere other than this -- devastation and anxiety -- and it is criminal that people whom she trusted, who should have put her best interests ahead of their own, led her down a path of poverty.

And now she -- and she alone -- has to pay the price for it. There is no accountability for the people who screwed her, most of whom will never know or care about her plight. The good news? If she's willing to make major lifestyle sacrifices, she will one day have a financial life again.

Zac Bissonnette's book
College On a Dime wil be published by Penguin in the fall.
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