*The following post is a guest post from Mia Jones. Mia is a freelance writer. Traveling and writing are her passions, and she uses articles as a platform to share her vivid experiences. She explores various topics on personal finance, frugal living, minimalism, etc. in her creative endeavors. Her mission is to help others find ways towards a healthier financial life. Follow her on Twitter at @MiaJone96792889
For most of the recent graduates, their student loan debt burden is giving them nightmares. Not only the student loan debts, but a large number of young adults also admit that due to multiple types of debt burden, they are stressed and depressed. The pressure of getting out of student loan debt along with other financial obligations taking an emotional toll on them. The debt load is affecting the borrower’s mental health.
Well, there is no doubt that financial matters and mental health are correlated. Actually, financial wellbeing affects people’s overall well-being. We can see that over the last decade, student loan debt in the USA has increased to $1.6 trillion. According to the report of Experian, 43 million people are struggling with student loan debt.
However, people in power are proposing offers like loan forgiveness, interest-rate caps, and tax-code changes to reform the broken education loan loopholes. But as of now, nothing has come to rescue those 43 million people with student loan debt. And, the outcome of this huge burden are now visible among a large number of them.
On the other hand, lifestyle inflation leads to huge credit card debt among people. According to the Federal Reserve’s G-19, there are almost 253 million people who are in credit card debt. Each household carries on an average $8,398 credit card debt.
The scary numbers are showing how bad the debt picture is and how it is creating an emotional toll on people.
How is this massive debt burden creating financial stress on young adults?
The huge student loan debt creates many remarkable financial challenges for people who have completed education with student loans. Some of them are more stressed about their student loans because they have no or less income. They have admitted that they can avoid credit card debts but they can’t avoid student loan as higher education is becoming very expensive these days. Furthermore, after completing the studies and getting a decent salaried job is also uncertain. Thus, they are crushed by the student loan debt as their debt level causes a lower credit score. The student loan debt is not letting them buy a house or establish a family. This creates a psychological toll on them. On the other hand, being desperate to get out of their student loan debt, they are doing high paid yet toxic jobs. People are considering multiple gigs and side hustles just to make ends meet and living under continuous financial pressure.
Some people are getting obsessed with a fancy life. They use their credit cards unnecessarily and don’t make the payments on time. They live a life beyond their means and welcome debts. The mounting consumer debts make their financial life worse.
How can people tackle their debts including student loan and consumer debts?
It is true that debt gives mental pressure. When people feel hopeless, they want to go to a place where no debt is troubling them. When they can’t do this, they feel anger and irrational. Excessive debts create pressure to do work more, which creates depression. And when people are not getting out of the debt cycle, they feel purely defeated.
But, this should be changed. What can you do realistically to change this? How can you tackle your debts?
1. Believe the fact that you are not alone
Yes, it is true that you are under tremendous financial pressure and experiencing anxiety and stress. The situation is making you a loner. But you have to fight back with your feeling. You shouldn’t make yourself a loner. Because there is a large number of people who are in a similar situation. Yes, everyone’s debt story is unique, but, they all have some sort of financial stress, which is common. So, be strong and accept your financial worries and get ready to fight back.
2. Assess your debts
You have to analyze your debts to find out the best way out to repay them. For example, most of the student borrowers have multiple student loans with different interest rates, monthly due dates and repayment dates. So, to tackle these student loan debts, they should be aware of the student aids available. The Department of Education has several repayment options for federal student loans.
On the other hand, for private student loans and other consumer debts, you should find out other debt payoff options. If you have multiple debts, you should create a simple spreadsheet to keep track of their repayment.
3. Asses your cash flow
Take your income minus expenses including monthly necessary expenses to understand how much you can afford your debt payments. This will help you to pick the right repayment option for your federal student loan debts. (Editor note: Besides basic necessities, destroying your debt should be your highest financial priority.)
4. Simplify your monthly debt payments
If you are sick of making multiple monthly debt payments and tired of remembering the due dates, then think about simplifying the debt payments. If you have private student loan debts and credit card debts along with a car loan, then consider consolidation to simplify the debt payments. You can also refinance your student loan debts. You need to take out a loan with a favorable interest rate and term. Pay off all your debts with that loan to make yourself free from all the monthly payments. Now, you have that new loan to pay off. Make sure you repay the loan as fast as you can.
5. Consider the autopay option
If you are repeatedly missing your due payments, then sign up for autopay. Talk to your bank to set an autopay option with your bank account so that the payments get deducted automatically on a particular day. This will decrease the chances of missing a payment and getting a complicated figure of the total debt amount.
6. Get enrolled in a debt consolidation or settlement program
If you are not sure how to consolidate multiple debts, then you can consider professional debt consolidation or settlement programs to get out of your debt.
If you enroll in a debt consolidation program, you will be provided a single monthly payment. You will find it easier to repay the loans in easy and affordable monthly payments. If you enroll in a debt settlement program, the debt negotiator will reduce the total debt amount by negotiating with your lenders. Here, you will also be provided a favorable amount to make to get out of all those pesky debts.
7. Share your debt worries
Keeping any issue to yourself makes the problem worse. Don’t feel ashamed about your financial worries. You should talk about your financial struggle with people to whom you are close. If you still feel depressed about the financial issues, then talk to a therapist. You will feel better by sharing your struggle. If you have a family, then you should disclose financial issues to them. Thus your family members can cooperate with you to mitigate the problem.
8. If there is no way, then file bankruptcy
If all the debt repayment options out there can’t help you, then file bankruptcy to start afresh. Filing bankruptcy is a way better option than getting depressed. You have a whole life ahead to reestablish your financial life. You can get out of all your consumer debts by filing bankruptcy. Talk to a bankruptcy attorney for help. Well, I know, at this point of time you must be wondering if it’s possible to file bankruptcy for your student loan debt. So, here comes the next scenario…
Unfortunately, it is not always possible to discharge your student loan debts through bankruptcy. Due to some policies, student loans are very rarely discharged through bankruptcy. If one could easily get rid of their student loan obligations by filing bankruptcy, the entire student loan program and the bankruptcy court would soon collapse due to the abundance of people who took college loans to finance their education and then filed bankruptcy, not being able to arrange the monthly payments.
However, it is not impossible to discharge student loans in bankruptcy; it’s just a bit difficult. Student loans and bankruptcy can only go hand in hand if they meet some pre-existing conditions. If the students have been repaying their loan for the past seven years, then he/she can discharge the loan through bankruptcy. If the borrower proves that the payment of the debt will impose an undue hardship on his/her dependents, the borrower can again be able to discharge student loans. There are some other criteria that will decide whether or not a student borrower is eligible to discharge student loans through bankruptcy.
9. Be generous to yourself
Will repaying the debts deprive you of living a minimum standard of living? The answer is, not really. It is you who can balance between the journey of debt repayment but also living a nice life. Remember, living life better doesn’t mean spending a lot. Find happiness on every small purchase. Give yourself a small reward now and then. Take a break and celebrate every small success.
Lastly, to avoid falling into a massive amount of debt, people need to think practically. Some people are obsessed with the fancy high-end colleges that charge a lot. Also, before choosing the stream, students need to think about the career and the options to repay the education loan. Parents also need to set aside money if they wish to help their children in higher education. Moreover, people need to change their mindset of living a better life. After all, living a simple life is far better than living a so-called rich life full of debts.
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*Nothing on my website is professional or legal advice. I am only sharing information that I have learned and it may or may not be accurate. I am not liable for any problems you may have by following this advice. Please do further research and get professional and/or legal advice about any of these topics. This post likely contains affiliate links. This site could be paid for clicks or purchases made through these links.