How to make mountainous student debt less huge

The Baltimore Sun

There's student loan debt. And then there's student loan DEBT.

The former is the $20,000 in loans of the typical college graduate. The latter is four or six times that amount, typically racked up by those attending grad school at an elite university or medical school.

You can manage big payments if you land a high-paying job - say, as an associate at a large law firm. But if you enter a field where the pay isn't so grand, you can be repaying student loans for most, if not all, of your career.

Dr. Lisa Brown of Bel Air finds herself in that latter situation. The 48-year-old chiropractor has $95,000 in student loans, but only earns about $30,000 after taxes.

"I'll be paying on it until 80," she says. "I'm just tired of this."

Brown is looking for an alternative to a lifetime of payments.

There are alternatives where debt can be wiped out, although they may require you to make payments for years or work in fields where there's a shortage.

Some programs are newly created by Congress, such as loan forgiveness for those in public service.

Also some states, including Maryland, help residents in certain jobs to repay loans.

The first step in figuring out where you stand is to know whether you have federal or private loans.

Private loans don't offer loan forgiveness or the friendly payment plans you get from the federal government.

"It's like having credit card debt. Whether the lender wants to help you is at their discretion," says Deanne Loonin, a staff attorney for the National Consumer Law Center. The group recently launched a Web site for borrowers at

If you have federal loans, there are three options for erasing debt. (There are others, like bankruptcy, but it's tough to qualify.) Of the three, two require that your loans be through the government's direct lending program. If they are, go directly to the options.

If your federal loan comes through a private lender, you can switch to direct lending by consolidating your loans, says Mark Kantrowitz, publisher of FinAid, an online provider of student aid information.

Private lenders, not wanting to lose business, likely won't tell you how to do it, said Kantrowitz. Instead, go to the Department of Education's Web site ( to learn how.

Here then are your options:

Income-contingent repayment

Once you're in the direct lending program, you can ask for this borrower-friendly plan. Lower-income borrowers can reduce their monthly payments and debt remaining after 25 years of payments is erased.

Payments are 20 percent of discretionary income. That's defined as the amount of your adjusted gross income that exceeds the poverty level. For a single person in Maryland and most other states, the poverty level was $10,210 in 2007.

If you're at the poverty level or below, your payment is zero, Kantrowitz says. And if your income stays at the poverty level for 25 years and you never make a payment, the balance would be forgiven, he says.

Income-based repayment

This new option, which takes effect in July 2009, is more generous.

Payments are 15 percent of discretionary income. And in this case, discretionary income is income exceeding 150 percent of the poverty level. Again, you don't have to make a payment if your income falls below that. Unpaid balances after 25 years are forgiven.

You don't have to be in the direct lending program to be eligible.

Public service forgiveness

This new program helps those entering fields that we value in society, but underpay. That includes police, school librarians, social workers and government and nonprofit employees.

You must make 10 year's worth of on-time payments while working in public service. After that, remaining debt is forgiven. The clock starts with payments made as of last October. Your loans must be in the direct lending program to qualify.

Under the standard schedule, student loans are repaid in 10 years. This benefits those making smaller payments using income-contingent or income-based repayment plans.

State help

Check your home state for programs that help reduce student loans.

Maryland's Janet L. Hoffman Loan Assistance Repayment Program gives $10,000 to repay student loans if you're working at a nonprofit or in state and local government in fields such as law, teaching, nursing and social work.

Awards are competitive and your income can't exceed $60,000 if single or $130,000 if married. The award can be renewed for two more years for a total of $30,000, says Elizabeth Urbanski, with the Maryland Higher Education Commission.

Maryland also gives up to $30,000 a year to Maryland dentists serving the neediest patients here. And in another award, those in primary care services can receive $25,000 to $30,000 a year for working in under served areas. Details are available online at

The most urgent message here: No matter how deep in debt you are, make sure you don't fall too far behind - or worse, default.

Brown, the chiropractor, says she was debt-free when she left nursing to return to school. She borrowed $84,000 in federal loans for school. After graduating in 1996, she worked for another chiropractor to learn the business.

"I wasn't making enough money to live on " and couldn't afford the $1,000 monthly student loan payment, she says. "I don't remember if I was officially in default. I know that I wasn't making the payment and I should have been. I just didn't have it."

In two years, her balance ballooned to $125,000. She's now back on track paying $500 a month.

Once in default - 270 days in arrears - Uncle Sam plays hardball. You will be charged interest and collection and late fees.

That's not all. "They actually can come after you in a way that private collectors can't," says Loonin, the consumer lawyer.

The government can grab your tax refund, garnish your wages without a court judgment and keep part of your Social Security benefits, Loonin says. And there's no time limit.

"You can be 90 and they are still coming after you," Loonin says.

Questions? Comments? A tip to share with readers? Contact Eileen Ambrose at 410-332-6984 or by e-mail at

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad