Life and Money With Helaine

Dear Helaine: A friend of mine took out huge private student loans to pay a hefty tuition bill at a private college. It's several years later, and she's struggling to make even the minimum payments. Yes, she shouldn't have taken out those loans, but what's done is done, and she's trying to figure out how to handle her obligations in a reasonable manner.

Even working both a full-time and part-time job, she is only able to pay the absolute minimum on her loans -- and that's still more than half her take-home pay. Her credit cards are maxed out with things like buying groceries.

Here's the kicker: Her parents co-signed the loans. She looked into bankruptcy and other ways to reduce the loans, but was informed that won't work for her. When she reached out to the bank, they would not renegotiate and told her they would go after her parents.

She says she feels like there is no light at the end of the tunnel for her, that she will be paying the minimum on the loans for the remainder of her life. I hate seeing her struggle with the enormous stress she's under every day trying to make ends meet while paying these loans. Are there any options she might not be aware of to help her manage things, while not forcing her parents, who are near retirement and are not wealthy, to pay her loans? -- A Friend Is in Need

Dear Friend: Our nation's student loan system is a disgrace, and nowhere is this more clear than when it comes to privately issued student loans. While federal loans at least offer income-based and income-contingent repayment plans, private issuers do not need to do such things. At the same time, it's all but impossible to get student loans discharged in bankruptcy court since loan holders need to meet the very tough "undue hardship" standard. The result? Situations like the one your friend is facing. It's unconscionable.

I can't, alas, offer any magic advice that will make it all go away. Instead, I would suggest she meet with a nonprofit debt counselor like the National Foundation for Credit Counseling and see if they can help her come up with a realistic financial plan, or assist in refinancing the debt into a lower-interest loan or one with a longer repayment schedule. The latter would lower her monthly payment, but result in her paying more interest over time. Not ideal, but infinitely better than running up credit card bills buying necessities.

I'd also suggest another meeting with a bankruptcy attorney as it's possible they can more effectively negotiate with the financial institution holding the loan than she could on her own. Finally, she might want to begin thinking about something easier said than done: finding more lucrative employment.

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