Shedding Stress by Shedding Student Loan Debt

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LSS Financial Counselor Katie Eastman, back, works with Julie Killian on student loan repayment.

Only months away from a wedding to her husband-to-be, Julie Killian should have been spending time talking to wedding planners and making sure every last detail of her special day was in order. Instead, she was spending time on the phone with debt collectors, trying to remedy a problem with her loan.

Ten years earlier, Julie was working her way through school. To relieve some financial pressure, she co-signed a loan with her then husband. Always diligent about making sure every duck was in a row, especially the kind with bills to be paid, she made good on each monthly installment — even after she and her husband got divorced and the loan stayed in his name.

Without a hitch, years of payments went by until Julie got a notice from her bank stating that the loan had been forgiven. The language in the notice led her to believe she could stop making payments. Julie assumed everything was fine until she got a phone call from her ex-husband saying that payments weren’t being made and his credit score was severely impacted. Continue reading

Finding the Key to Financial Success

Every morning, Ann counts the blessings she’s received as a wife, mother and a director at a long-term care facility in Brainerd. The job she loves does not pay much, but it always covered her family’s needs. Then, when unexpected death shook Ann’s family, she was suddenly unable to pay her bills on time, most notably on a $10,000 student loan she took out more than 20 years ago.

Always the responsible borrower, she immediately called her student loan servicer to discuss alternative repayment plans.  But, instead of helpful advice she received some unsettling news. On top of the payments she still had to make, her current interest balance was $24,000 – nearly twice as much as the original loan.

“I was in complete disbelief,” Ann said. “I was diligently making payments and thought I was making progress, only to find out I was going backwards instead of forward. It was devastating.”

Thinking of her family first, Ann was determined to find a way to redirect her pathway to financial stability. First, she had to understand what caused the backlog of loan payments and how she could reduce the pileup of bills, and her stress.  The search for answers led her to Lutheran Social Service of Minnesota (LSS of MN), where she found expert help from certified financial counselors.

“The minute we started talking, I felt like I wasn’t walking through the weeds alone anymore,” Ann said. “Finally, someone more knowledgeable was going to guide me through what happened and help figure out my options so that I could make the best decisions for my family and me.”

Together, Ann and her counselor, Katie, pored over her payment history, finding that with monthly payments of nearly two hundred dollars, her principal balance was reduced only slightly. In fact, her balance was getting bigger, not smaller. Ann’s shock grew after learning that in order to pay off her loan completely in less than ten years, she would have to double her current monthly payments.

“It felt like a situation that would get worse before it got better,” Ann said. “But Katie showed me some things to do that would put me in the right direction and make sure I kept moving upward.”

The key to Ann’s success, Katie said, is rearranging her budget to make room for her new repayment plan.  They discussed changes to her spending habits, including reducing non-necessities like eating at restaurants or hitting the coffee shop. They also talked about small ways to make her income grow, like saving whatever she can afford, even five dollars a month, and setting it aside in a separate saving account.

“All of these are small changes, but there is no doubt they will make a big difference in Ann’s ability to reach her goal of paying off her loan in under 10 years,” said Katie Eastman, Financial Counselor with LSS of MN. “She left our appointment equipped with more knowledge and the tools she needs to succeed.”

Today, Ann is staying the course to meet her goal, and is once again thankful for where she is in life. “Had I not come in for an appointment at LSS, who knows how much more the balance on my loan would have increased without being aware. I am so grateful for the help I received in managing my finances. I’m not so worried for my family’s future anymore.”

If you, or someone you know, is facing student loan debt, it is a good idea to meet with a student loan counselor to create an action plan like Ann did. LSS financial counselors can help with consolidation, determining the best repayment option, if you’re eligible for loan forgiveness and avoiding default. For more information, call 888-577-2227 to schedule a free phone, Skype, or in-person student loan repayment counseling session.