More often than not I read horror stories of people such as (I've Paid $18,000 To A $24,000 Student Loan, & I Still Owe $24,000) that acquire college debt, pay monthly for years, and end up owing the same or more than when they started.

What is the deal with these loans? How are they legal? What re-payment detail are people overlooking? How can someone get out of this vicious cycle?

For the record, I obtained a bachelor's degree, graduated with a sub $10,000 loan, and paid it off in about a year with no troubles.


Additionally, here is a related post on this site: $140,000 student debt. What are my options? Please help


I've been seeing a lot of comments surrounding the expensive U.S. educational system but I would just like to point out that the article's author studied in Paris and Dublin.

closed as too broad by Hart CO, Dheer, JoeTaxpayer Sep 25 at 12:06

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

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    @monkeyzeus the article you linked is terribly deceptive. She states a balance of $24,294.82 in one part of the article, then in a screenshot of the payment history she shows a payment of $793.26 on that same loan (a 3 year repayment schedule) which should entail only an additional ~$4300 in interest at 11% for that one loan. The rest of the loans are at more reasonable interest rates. She probably shouldn't have let the interest accumulate while she was in grad school. – Nathan L Sep 21 at 20:19
up vote 73 down vote accepted

(This answer is based on the article you linked in the comment, but could probably apply in general as well)

What re-payment detail are people overlooking?

There are not many specifics in the article, but here are some possibilities:

  • Some interest had accrued while in school, so the amount owed after graduation was significantly more than the original "principal amount".
  • A payment was missed (indicated in the article), and the interest plus penalties was added to the balance owed.
  • She is on a deferment plan in which the monthly payment is less than the interest that is accruing. The payment amount in one image is $171 but she says the interest each month is $480.

How can someone get out of this vicious cycle?

Time and money. Work extra jobs, pay more than the minimum monthly amount (and don't ever miss a payment), reduce expenses to bare minimums, and keep working until they're gone. There's no magic sauce (even bankruptcy) for student loans.

On a side note, I wish the article had more of a "don't make the same mistake I made" tone, but it reads more like a sob story trying to get support for student debt forgiveness (obviously at the expense of those that aren't paying for student loans). Instead of taking responsibility for bad decisions (signing up for a loan without reading the "multi-page contract", going to private school with no way to pay for it other than borrowing, tacking on another 24K because heaven forbid she give up the "relationships I had cultivated with students and professors"), the whole article feels like another "No one can succeed except the rich" rant.

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    I was trying to avoid pointing to any specific references because I too felt that they are far too sob story-ish. I was hoping my question would garner answers which point to the specific pitfalls and traps of student loans and their re-payment programs from a numbers standpoint rather than entitlement. For the record I know someone who has been paying $400/month against their 20K student loan and after 10 years now they still owe 20K. I tried offering help by reading their loan terms but they never got around to showing me. – MonkeyZeus Sep 21 at 19:40
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    @MonkeyZeus That example doesn't hold up to scrutiny, a $20,000 loan at 20% interest would be paid off in 10 years with payments of $386/month. – Hart CO Sep 21 at 20:01
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    Another thing I will say regarding the last paragraph: I would disagree with that, in particular because it sees things as an either/xor form of reality. Either you "take responsibility" or you "blame the system". The system should not be immune to criticism or openness to improvement. At the same time, you should always try to make the most prudent decisions possible when working within the system that exists now. The best approach to me is both: there is no logical reason you cannot do both - be responsible with your burden while also advocating for it to be less burdensome to begin with. – The_Sympathizer Sep 22 at 3:31
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    -1 for the last paragraph. – R.. Sep 22 at 22:26
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    What is interesting to me is that the person in the article mentions working from 6 am to 11 pm for basically minimum wage -- taking 2 buses, 3 trains to work; all uphill in the snow -- all of this extremely hard work... but completely after the fact. If she put even a fraction of this effort into thinking of what she was doing before hand it would have saved her from a lot of these problems. I think a big "pitfall" is that people do things without thinking and then have to work really hard to fix them. If they think before hand it would go so much smoother. Think of a real plan and execute it – grinch Sep 24 at 15:20

Attend a less expensive school

The biggest pitfall to avoid is attending a school at you cannot afford. If you can get a need-based scholarship to Harvard, by all means attend an expensive university, but don't go to a school that costs $30K/year if you have to go into debt for it. There are plenty of cheaper alternatives like attending a community college until your general education credits are complete (or you have an associates degree to transfer with). Go to an in-state school to take advantage of resident tuition rates instead of non-resident rates.

Prefer government subsidized loans to private loans

After you have avoided as much as you can in tuition costs, try to live within what is available in government subsidized loans. Stafford subsidized loans have a subsidized rate, and no interest accumulated while attending school. Stafford unsubsidized loans accumulate interest immediately, but the rate is still subsidized. Private loans often have the higher variable rates on the loans because they aren't government subsidized; they are generally only offered after the lower-cost loan options are no longer available, perhaps in cases where someone took too long to graduate or because they need more money than is deemed necessary by the financial aid formula.

Pay down the loans with the highest interest rate first

The next biggest pitfall is not paying down the loans with the highest interest rates first. In the article you linked in your comments, I saw $2000 worth of payments going to 8 loans, but the extra $500 payment was paying down a loan with 6.5% interest. If the extra money all went to the 11% loan, that loan could be repaid in less than 2 years. (Without the extra payment it would still be retired in 3 years at the current repayment rate.)

Pay off any high interest loans before grad school

Other pitfalls are mentioned in other answers. The article you linked mentions that this individual attended grad school outside the US and allowed the loans to default, accumulating significant interest and fees before finally initiating repayment a few years later. Perhaps she should have considered paying down the private loans before attending grad school as that would have saved her many years of payments. In any case if you have loans that are accumulating interest, it's not a great idea to allow that interest to be accumulating while attending grad school, even if doing that will allow you to delay repayment.

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    The whole thing reads like someone who has no clue how debt works and is complaining about how bad things are while doing nothing about it the whole time. What kind of masters degree did she get where she gets a job starting out at 20k a year in New York? The article does call it an office job so it's quite possible it isn't even related to her masters degree. Sadly I don't think her story is unique. We have a generation or two of kids who were sold college as the route to a good future and college loans as the way to get it. – Evan Steinbrenner Sep 21 at 21:09
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    @EvanSteinbrenner While a college degree, and perhaps even a masters, may be necessary to get a good paying job these days, it's hardly a guarantee. The job market for millenials has not been great. – Barmar Sep 21 at 22:55
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    Related to go to a “cheaper school”, “make sure your degree is worth the price.” I too, have read many horror stories about people with hundreds of thousands in student debt and multiple undergrad degrees in disciplines with poor job prospects and low salaries. I remember one about someone who went to an elite school and got degree in English lit, gender studies and theater something or other. Congratulations, you paid a quarter million dollars for a bunch of degrees you can use to get a job paying 30k a year, if you can even find a job. What did you expect? – HopelessN00b Sep 21 at 23:44
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    @Barmar: I think this depends on your field of study. I don't believe most people graduating with STEM degrees are having problems finding jobs. – jamesqf Sep 22 at 3:45
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    She seems to be clueless in another respect: "universities outside of America don’t believe in charging $60,000 a year". Looking at my local state university, grad school tuition & fees for a state resident runs a bit over $2500 a semester. With a 20 hour/wk teaching or research assistantship (fairly normal) that reduces to $570. Living expenses (which you'd have to pay regardless of whether you're in school or not) run about $15K/yr. That assistantship pays around $1600/month. So you'd need grants, loans, or a good summer job to cover about $5K per year. – jamesqf Sep 24 at 18:04

One pitfall that I have not seen mentioned, and that I unfortunately fell into myself, is
Using Student Loans To Pay For Your Lifestyle

When you are in school on student loans, you are poor. Live like it. Do not use student loan money to fund partying and a nicer lifestyle than you can afford.

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    This is fantastic advice. While in school, I did not go to social events, I did not live in a fancy apartment, and I did not buy anything besides necessities. I spent my nights and weekends either working (full-time), or in the library studying for my course-load(full-time), because thats what my loans were for. I drove a POS Mitsubishi Mirage and had 2 roommates in a 900 sqft apt. It was not comfortable or glamorous, but it helped drive me to finish, and learning to stick with the basics helped condition me to not live beyond my means after graduating, focusing on paying down my loans. – AAlig Sep 25 at 15:18
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    The minimum payment is just that, a minimum. I kept my expenses close to what they were while in college, and a large portion of my salary goes to paying down my loans. I still drive the same crappy car, but within 2 years of graduating, my 25k loans are down to 11k, because I pay more toward my loans than I do for other expenses. While some of my friends appear more successful due to new cars or larger houses, many are in debt than they were when they graduated because they never caught on to "living like you are poor" and not "funding a nicer lifestyle than you can afford". – AAlig Sep 25 at 15:24
  • Wish I had known better when I was in college. Still paying of debt when I should have graduated debt free – Kevin Sep 25 at 16:20

Paying more for a degree than it’s worth. (In addition to what other answers have said about not paying enough towards the principle, and going to expensive schools.)

One of the big pitfalls I’ve seen in these kinds of sob stories is people going to an expensive school for an economically worthless degree, and then being shocked that having six figures worth of debt with a degree in a dying industry with few jobs and horrible pay was not a recipe for success. (And I actually have a relative who did that - he got an undergrad about 10 years back in something to do with industrial printing... as in applying ink to paper, and was shocked to find no one’s hiring for that, and the pay is lousy.)

I’ve got nothing against those kinds of degrees, and in fact, one of my majors falls into that category, but not recognizing that upfront is a recipie for disaster. If you want to follow your passion and get an economically worthless degree, recognize that it’s a hobby or a luxury - an expense, rather than an investment. Which, incidentally is what I did - majored in history, because I enjoyed it, and got a business/technical degree as an investment in my future.

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    "recipient for success" -> "recipe for success"? – njuffa Sep 22 at 4:14

The thing that comes to my mind here is that they are only making the minimum monthly payment. Doing this with any type of loan, not just a student loan will prolong the process of getting rid of debt. If you want to become debt free you always have to make more than the minimum monthly.

Take a credit card for example say you owe $100 on that card at 18% monthly. The minimum monthly payment is something like $15. It would take you a long time to pay this off just sticking to the min monthly because interest has accrued on the loan.

If the first payment is $10. Next month you owe 90 before interest, with interest you owe an additional $16.2. Now you owe $106.2 (90+16.2). This is more than the original amount because they didn't make the minimum. If you miss a few payments, or make less than the minimum monthly, you will owe them more money. Even if you make the minimum exactly it still leads to a longer loan, the longer the loan occurs, the more interest is paid instead of principal on the original loan.

If instead you paid $50 it would take 3 months to pay off the loan, and you would pay less interest on it overall. The same thing happens with student loans, just at a lower interest rate, and with a different payment schedule. The reason you got out of debt fast was that you paid off more than your minimum monthly. That's why you didn't take so long to pay back the loan, and they did (they took out a loan they couldn't afford likely).

This is legal because they basically outline this in the contract you sign, or at least give you enough information to figure it out on your own. If you don't then the government sees it as your fault for being financially irresponsible not the lenders.

Many people borrow more than they can repay, then take advantage of loan forgiveness on an income-based repayment plan. From what I've seen, this is the most common scenario by which people make so little progress on their student loan principal.

A federal student loan with a standard repayment plan will be paid back in 10-years barring any periods of forbearance/deferment; in those plans, you do see principal decrease each month.

When it comes to loans with higher or adjustable rates, people who borrow too much will quickly be unable to keep up with the standard repayment schedule and will have to get into an alternative arrangement that drags out repayment or periods of forbearance where interest accrues.

Regarding breaking the cycle, the worst part of that linked article is that they seem to have learned little: Each time they upgraded their living situation they dragged on repayment further. That much debt at those interest rates should be treated like an emergency; true bare-bones living is in order with that kind of debt load.

Warning others not to make the same mistakes would be nice too. Nothing will break the cycle faster than people refusing to play the game of going into massive debt for some college classes.

My immediate response is "the biggest pitfall is having a student loan.". There are options for getting past secondary education without a student loan (even in the USA). Check out College of the Ozarks, for example

The second biggest pitfall is taking a loan with no guarantee of employment, or with a below par salary. For example, one should never take a student loan to get an education or theology degree, because the salaries won't allow you to both live and pay off the loan.

  • Don't know about theology, though some of those televangelist types seem to do pretty well. Education, though? A quick search for teacher salaries in my state finds that "The average Public School Teacher salary in Nevada is $56,367 as of September 01, 2018, but the range typically falls between $49,212 and $65,076." How can you not live and pay (reasonable, not expensive private school) student loans on $49K/yr? – jamesqf Sep 25 at 17:01
  • The average starting teacher salary in USA is $38,617. the average teacher salary is 58K including all levels of experience. Given the high burnout rate in the first 5 years, the salaries are biased towards the lower end of the scale. In contrast, a starting salary for an engineer in the USA is 57,000 with an average salary of 86,000. Engineers also get profit sharing and performance bonuses that teachers don't get. – pojo-guy Sep 25 at 17:51
  • Televangelists are a minority in the clergy. Most clergy's take home pay is in the under 30K per year range. For teachers - first take off 50% for income and state taxes (not sure about he real tax rate in Nevada, but 50% is a good rough approximation in the USA). Real take home pay after all taxes is closer to 25K. Your student loan payments and living expenses have to come from that. – pojo-guy Sep 25 at 19:30
  • Sure, you can make more money as an engineer than as a teacher, but is that relevant? The question was whether one can live and pay off a student loan on a teacher's pay. Personally, I would have no trouble living on $38K/yr - in fact, l do live (and quite comfortably) while spending about $10K less. – jamesqf Sep 26 at 18:32
  • I'm not sure you could do that with a family. My family is noted for frugality, and 38K per year before taxes would be very rough. Under Obamacare, my family's health insurance (bronze plan) takes over 50% of my takehome pay. – pojo-guy Sep 26 at 18:37

First, don't use private student loans.

Private student loans are vile. They have all the bad characteristics of most private loans -- but they also have special status that they cannot be discharged in bankruptcy. The high interest rates is what made that debt unmanageable, and the responsible thing to do in that situation is discharge it in bankruptcy. However between sticking her head in a noose by taking them in the first place, and sticking her parents' necks in the noose with her, she became the author of her financial ruin. Which she will overcome, she just won't enjoy it none too much, which she should not.

The parents, by cosigning, also deserve some of the pain and should be helping her pay the notes down.

She should also be paying the highest interest loans first, but I'm sure the lender has rigged it to make that impossible.

Pay interest and principal on separate cheques

The other thing she definitely should do, is write two separate checks for interest and principal. That will require doing the math to figure out how mhch interest she is accruing each month, and based on the variable rate it may require a monthly phone call to the lender. Alternately, she can make the interest payment definitely large enough to cover the interest.

Computing and paying the interest separately assures you are paying 100% of the interest every month. Which is a really big problem she has been having. The design of those loans allows them to go into neg-am, i.e. The lender will accept a minimum payment less than the interest charged. She must make sure to pay 100% of the interest every month, because they won't.

The second check, for the principal, is designed to make the paydown real. It educates her that it is this payment, not the other, which is reducing her debt - and only this payment has that effect.

In fact, that is correct accounting practice - in GAAP, every loan payment must be fractioned into interest and principal, with each one treated quite differently.

The biggest pitfall is to study in the United States where the costs are so high. You should move to a country with almost free tuition for the duration of your studies. For example, Germany has many universities with low tuition costs that provide a high quality education in places with a low cost of living.

Next, you want to cover as much as possible by working at the side and staying at a cheap place (e.g. a student residence) so you can take a smaller loan so you can pay it back faster.

Finally, I recommend to take a loan with a fixed and low interest rate from a reputable agency. For example, you should be able to get a loan with about 4% interest at the KfW.

As requested, here are the monthly living costs (source) for Leipzig, Germany, as an example for a German city:

Monthly living costs

You will need about 650 EUR a month for your living expenses in Leipzig. Of course, this figure is only an estimate and depends on how much you spend.

Please remember that you must provide proof of secured funding for your living expenses when you apply for a visa in your home country.

Here are some examples of monthly expenses in Leipzig:

Rent for apartment/room: around 150.00 EUR - 250.00 EUR
Health insurance: around 80.00 EUR
Study materials: around 50.00 EUR
Food, clothing, miscellaneous requirements: around 250.00 EUR

In addition to monthly costs, you will have to pay deposits for your accommodation, UniCard etc. at the beginning of your stay. So plan on about 600 EUR to start you off in Leipzig. Please also note that you will have to pay the semester fee and, if applicable, the semester ticket at the beginning of each semester. Tuition fees

At the moment no tuition fees are charged for a first degree course at Leipzig University. Every semester you have to pay a student fee for the Studentenwerk Leipzig (Leipzig Student Services), the student body and the semester ticket.

The semester (half year) fee is 220 € per, which includes public transportation with tram, bus and train in or near the city.

In most subjects, like the natural sciences, you get a Bachelor and Master, which is internationally valid. German diplomas have a good reputation world wide as well. Exceptions are subjects like law or medicine.

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    No, the main problem (of the girl writing the article) was that she was absolutely not mentally fit to take on a loan. I have no mercy for people who sign paperwork about 50k AND DONT EVEN READ THE CONTRACT! (Or sign it without understanding it). That's it. That's the entire problem. Yes US Education is expensive, an student loans are terrible, but OP has found an article describing an idiot being scammed. – Hobbamok Sep 24 at 7:25
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    This answer is over 50% Germany-centric and the non-centric parts lack substance. – MonkeyZeus Sep 24 at 11:56
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    @MonkeyZeus: My advice for Americans is to move to Germany for the duration of the education. I will edit my answer to make this more clear. – Konrad Höffner Sep 24 at 12:06
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    There are actually lots of low cost, or even free, options for college in the US. You're just perpetuating the belief that they don't exist. State schools and community colleges are usually heavily subsidized – Devon Sep 24 at 12:48
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    I don't find this to be a helpful answer. You may be right about the costs of education abroad, but you blithely ignore the other fundamental costs of moving to another country and ensuring that all of one's paperwork is in-line and ready to go. Worse, this is inaccessible for most American college students; despite the fact that I had managed to graduate college, asking my parent to send me abroad for the duration of the education would have been an immediate non-starter. I think you were trying to be helpful but it comes across more as snarky. – Makoto Sep 24 at 21:37

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