Ask Jean: Struggling Through Student Loans - Jean Chatzky - Making money make sense
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Ask Jean: Struggling Through Student Loans

Education savings“My niece is stuck in a 20% private student loan that wants $800 a month. She has contacted them several times for options and they tell her there are none. She has put the loan into forbearance twice. There has got to be a solution. She wants to pay, but she can’t afford that much — she only makes $1000 a month. She has several other federal loans that are in repayment & she is handling those, but this one pushes her over the top.” – Sheri

Unfortunately, this is a common situation these days for students trying to pay off private student loans. The fact is, when you have private loans, you have fewer options for adjusting the repayment plan than you do with federal loans. That being said, going into forbearance is not a good choice – the interest will still build up while the payments defer.

I asked Mark Kantrowitz of and for his suggestions – and included a few of my own as well.

Look into getting a lower-interest loan to refinance the existing one. Asking your bank for a personal loan, or looking into private consolidation loans (for more information, take a look here) could be beneficial. “A new loan at 10% interest, $47,000 with a 20 year term has a monthly payment of $453.56, 43% lower,” says Kantrowitz. If you don’t qualify, you could try a person-to-person (P2P) loan. Many students are finding money for college through sites like and While there are always risks when it comes to borrowing from people you don’t know, this could be a valuable option for making some of those monthly payments.

It’s also a good idea to call the lender. “If you threaten to file for bankruptcy, you may get a little movement by the lender, says Kantrowitz. “If you talk directly to the lender as opposed to a collection agency, a ‘you can’t squeeze blood from a stone’ argument sometimes works.” This is really only an option, however, in extreme circumstances (for example, when the payments exceed your niece’s take home pay.) However, actually declaring bankruptcy isn’t currently an effective option — Congress is considering changing the laws surrounding student loan repayment and bankruptcy, but nothing has been changed yet.

Finally, she could try to accelerate her loan payments to get rid of this loan sooner – though, with money being at such a tight squeeze, first she’d need to increase her take-home pay. Could she find a job that pays better, or get a part-time job over weekends or during evenings? For example, my assistant Kelly not only works for me, but also coaches swimming.  This will also mean tightening the belt big time – cutting out meals at restaurants and going to the movies, among other things, but in the long run, it’ll be worth it.

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