DEAR MARY: At age 46, I went back to school and chose University of Phoenix because I could go to school online and continue to work full time. Five years later I received my bachelor's degree at age 51.
I was proud of myself, but I work at a grain elevator in a small town and discovered that my new degree meant nothing to my employer. So it has done me no good. Now I face all the student loans. I just discovered that it will take 30 years to pay off my $71,000 in school loans.
The current $236 monthly payment is already stretching me. I can't afford to pay more each month, and the thought of throwing away all that money on interest and paying till I die has me super-stressed.
Is there any way that I can get at least some of this debt forgiven? I just don't know where to turn. -- Susie, Illinois
DEAR SUSIE: Reading your letter made my heart hurt. Oh, how I wish you'd written before you made the decision to take on so much student debt. I would have offered you my Rule of Thumb for student debt: Do not borrow more for college than you expect to earn the first year out of school.
I can tell you that repayment plans for federal student loans have become more generous recently, as some new rules have gone into effect. Ask your loan servicer about the "Pay as You Earn" option, which became available to borrowers at the end of December 2012.
This plan improves on the current income-based repayment program, pegging the amount you pay to your discretionary income (the amount by which your income exceeds the poverty line), and lowers the percentage of income you pay from 15 percent to 10 percent and the number of years over which you pay from 25 to 20 years. At the end of that period, any remaining amount is forgiven.
To qualify, you must have taken out your first federal student loan after Sept. 30, 2007 and received a disbursement from at least one loan after Sept. 30, 2011. Only direct loans are covered. You can learn more about whether you are eligible for this at StudentAid.ed.gov. Type, "Pay as you earn," in the search box.
DEAR MARY: I currently have $37,000 in credit card debt. All of the accounts are current, and I've stopped using the cards. Settling is not an option for me. I am close to signing with a DMP (debt management program), which would resolve this in four years. I have $10,000 that I can apply to these balances now. Can you suggest a better way? Thanks. -- Rick, email.
DEAR RICK: From what you've told me, it appears the steps you're taking are exactly what I would advise: Keep your payments current, stop using the cards, buckle down, and do whatever you must do to get these things paid off as quickly as possible.
My only caution is that the DMP you're considering should be with a reputable credit counseling organization that is certified by NFCC (National Foundation for Credit Counseling).
I want to make sure you understand that once you're accepted into the DMP, your counselor will work with your creditors to reduce your interest rates and get you onto a plan that will get your debt paid off quickly -- in your case, four years. That's good.
While enrolled in the DMP, you will make your payments to the DMP, who will in turn send the agreed-upon payments to your creditors. This is why you want to make sure you're working with a reputable DMP that has a good track record and testimonials from satisfied graduates of its management program. Good luck!
Do you have a question for Mary? Email her at firstname.lastname@example.org, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.