Q: I’m a single mother of two children, ages 16 and 13. I do not have any credit cards (haven’t for over 10 years). My problem is my $100,000 in student loans on which I am far behind. The payments are a bit over $500 a month. My only other debt is my mortgage ($2,150 a month) and my car note ($350 a month).
My credit score is now in the low 500s. It used to be in the 700s when I was in deferment for my student loans. I can’t make the $500 payment on my two student loans. What can I do?
I am also financially responsible for my father, who is retired and receiving his annuity and Social Security benefits, which leaves him with nothing after his mortgage, car notes and utilities are paid. I pay for gas for his car, his prescriptions and groceries, as well.
I’ve got so much on my shoulders, and I don’t know what to do anymore.
A: Let’s deal with the situation with your father first.
Perhaps, the two of you need to figure out if there is a way to consolidate your households, so that you are living under one roof with one mortgage payment. While I believe adult children should, when they can, help out their parents, you are in a precarious financial situation. You can’t handle your bills, let alone expenses for your father.
Most important is the situation with your student loans. It’s vital that you understand that you need to make every effort to avoid defaulting on your student loans. Your student lenders have some powerful collection tools. For example, they can get a wage garnishment, which will allow them to deduct 15% of your disposable income per pay period. I’m sure you would not like that to happen.
Contact your lender immediately and see if you can work something out to ease your burden. There is a relatively new program that can adjust your payments to make them more affordable. It’s called the Income-Based Repayment (IBR) program, which allows borrowers with federal student loans to base their monthly payments on their income and family size. But, in order to qualify for the program, you can’t be in default. That means you are going to have to get out of default. For more information on how to do that, visit the Student Loan Borrower Assistance Web site.
If you can get current on your loans, I think the IBR program will help make your student loan payments more manageable.