I only make $41K a year, but owe $189K in student loans. What should I do?

Question: “I will owe about $189,000 on my student loans when repayment starts. I’m so stressed. I got let go from my job and lost my apartment. I have so much debt and moved from New York to Texas in search of work. I started work in e-commerce with an oil pump company, but I will only be making $41,000 a year. I’m 45 years old and living out of my car until I move into a studio on the 15th of this month. Help.”

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Answer: You’ve already made some huge steps in the right direction and have a number of reasons to be optimistic. “Relocating to take advantage of a lower cost of living just shifted half your budget. With no state income tax and a low unemployment in addition to the low cost of living, Texas is a good choice,” says Jen Grant, certified financial professional at Perryman Financial Advisory. In addition, getting your living situation settled will likely improve your state of mind — and help you realize paying down these loans is possible. 

First up, the emergency student loan pause is now scheduled to end in May 2022, so you will want to think about how you’ll tackle payments then. One solid option to consider is to “try to get your loans on an income-driven repayment plan, which will cap your monthly payments at 10% to 20% of your discretionary income,” says Rebecca Safier, certified student loan counselor and education finance expert at Student Loan Hero. Since your payments will be adjusted in accordance with your income, they hopefully won’t be as burdensome as they would be on the standard plan.

“It could help to give your student loan servicer a call before repayment starts again to talk through your options and figure out an arrangement that works for you,” says Safier. Plus, in most cases, any remaining loan balance is forgiven under income-driven repayment plans if your federal student loans aren’t fully repaid by the end of the repayment period in 20 to 25 years.

If you qualify for income-driven repayment plans, you can choose from options like Income-Based Repayment, Pay as You Earn, Revised Pay as You Earn, and Income-Contingent Repayment. “All have their benefits and downsides so be sure to weigh your choices carefully,” says Amanda Push, higher education and debt expert at Student Loan Hero. 

Some borrowers who are seriously struggling with repaying loans, “might be able to postpone [their] payments longer by applying for deferment or forbearance,” explains Safier. Both programs let you temporarily suspend federal student loan payments, though it’s important to know that often interest accrues during this period and thus your balance on your student loans will go up. Plus, these programs may impact your ability to get loan forgiveness, and you usually have to qualify for these programs. (See details on these options here.)

Furthermore, “adhering to a budget or finding a side hustle may help with meeting those payments,” says Push. Work on increasing your income to more easily pay off the loans. Networking can help. “Join local groups with similar interests like working out, gardening, cooking or church. Set down roots and let people know what you like to do,” says Grant. Even in a tight labor market, most jobs come through connections — and a second job can really help you deal with your student loans. “There are some industries that are desperate and willing to be much more flexible than they were in the past. Pick up a couple shifts at a grocery store, restaurant or retail location … Finally, remember that Rome wasn’t built in a day and student debt isn’t paid off in a year,” says Grant.