I Can’t Live With My Medical School Debt Anymore

Question:

Dear Steve,

Over the last 3 years, I have accumulated $105,000 in student loan debt. I was in medical school and took out student loans for tuition and cost of living. After some difficult events including divorce and long distance from my children which lead to depression.

I withdrew after two years of the medical school program. I do have a bachelor’s in public health and am fortunate to have a job at a $65,000 yearly salary. But I pay $900 in child support, $925 in student loans, $500 in rent and the rest is for bills, transportation, etc.

I am not getting ahead in paying my private student loan of $73,000. I am not able to save up an emergency fund or save for retirement. I am 28 years old and it’s difficult seeing myself able to someday buy a home or get out of debt anytime soon.

If some type of accident were to occur (God forbid) I don’t know how I would get through it. Should I stop paying my private student loan?

Jared

Answer:

Dear Jared,

I feel for you. The road to getting out the other side of medical education and getting employed is a long trip. And if you pause or stop along the way, you are left with the debt and not the benefit of the education.

It sounds like you might also have some federal student loan debt and I’m hoping you have those in an Income-Driven Repayment (IDR) program. Not all IDRs are created equal though. It would make sense to make sure you are in the right program. Given your degree, it would also make sense to see if you are eligible for the Public Service Loan Forgiveness (PSLF) program that could lead to federal student loan forgiveness. The PSLF program is a mess at the moment but it will eventually get sorted out.

On the private student loan debt, strategically defaulting is always an option. However, it should only be done as part of a well thought out and informed plan of action. Defaulting has consequences and you need to be fully informed before you leap to intentionally default.

If you do default you have a few possible outcomes: sued, settled, or exploded. If you default you might be sued to collect the loans. Collectors will be calling. The balance due may skyrocket due to penalties and additional interest.

If the loans are settled you will still have to make payments but the balance may be reduced in half or more.

Your situation is unique and complicated. It would be foolish to make an emotional decision about how you want to proceed. The smarter plan would be to think about how difficult situations are resolved in the medical world by seeing an expert and having a consultation.

Due to the tremendous complexity of your situation, I would strongly recommend talking with my friend Damon Day. Damon is a talented debt coach who can evaluate your situation and create a customized treatment plan to deal with your specific financial pathology.

Outside of the debt, I’m hoping you are seeking treatment for the depression. By dealing with the depression you will find it easier to then deal with the financial trauma. Financial PTSD is real.

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