I borrowed $50,000 for culinary school, but now I owe $90,000. How can I get out of debt?

How to get out of student loan debt

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Question: I went to culinary school where I got a bachelor’s degree in culinary management. At the time, in 2007, I had no idea this would put me in $50,000 debt. I didn’t really understand the loan process, and no one explained it to me or my mom. When I left school, I was only making $9 an hour in kitchens and couldn’t pay back my loans – even though I was in a good school and loved to cook – and he m t took time to progress. I started to do a little better in 2017, but I used as many forbearances as possible until I was really able to repay the loan.

Then the pandemic hit. Got back into a rut and still haven’t paid anything. Now I feel overwhelmed because I owe $90,000. I also feel like school cost me more than I could ever earn straight after. I went to cooking school with the naive idea that I would be a chef when I left, but you have to struggle as a cook in the kitchen for a while before you make money. I wish the school had given me clear guidelines, but it’s a for-profit school and now the damage is done. What should I do?

To respond: You’re not alone: ​​Most students lack experience borrowing money, but are treated like adults for the purpose of borrowing for school. “Often their parents also lack experience with student debt. The loan counseling required by the U.S. Department of Education is minimal, and many for-profit, public, and nonprofit colleges don’t go beyond the required counseling,” says student loan expert Mark Kantrowitz. , author of Who graduated from college? Who doesn’t? The good news? You may have options such as borrower defense programs, as well as income-contingent loan forgiveness and repayment options (although both of these options are generally only available to those with federal student loans, so if you have federal loans and want to take advantage of them, you probably don’t want to refinance).

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Culinary arts students often dream of opening their own restaurant and becoming the next Julia Child, but most won’t. Indeed, it can be difficult to make a lot of money in the restaurant business, requiring years of hard work, and even then there are no guarantees. Therefore, it is not uncommon for the total debt upon graduation to exceed the average annual income of a culinary arts graduate.

Yet you may be wondering how it is possible that student loans reach almost double the amount originally borrowed. For one thing, interest accrues on your debt while you’re in school and continues for the six-month grace period after graduation. During deferrals and forbearances, interest likely continues to accrue, and if you fail to repay your loan, interest, collection fees, and late fees can significantly increase your balance.

Review borrower defense programs

Bobby Matson, CEO of Payitoff, a fintech debt management company, says you may be able to minimize or eliminate the burden of that debt because of where you went to school. “Your university was [likely] for-profit and ended up closing in 2019, which means you should consider borrower defense programs to get your debt fully forgiven. This is absolutely the first thing you should do because there are many similar cases out there and there are policies designed for those kinds of circumstances,” says Matson. This The student aid website can help you explore borrower defense programs and can tell you if you qualify.

Consider an income-driven repayment plan

If your debt is not canceled and you have federal loans, switch to income-based repayment plan – which bases your monthly payments on your income and could mean you pay as little as $0 a month – with the intention of eventually getting your debt forgiven. “That’s the advice any student loan expert would likely give to this borrower,” Matson says.

It is important to note that income-driven repayment plans can be negatively amortized, which means that loan repayment is less than accrued interest. “The loan balance will increase. But the remaining debt will be forgiven after 20 or 25 years of payments with an income-driven repayment plan, so the growing loan balance is more of a psychological burden than debt that will need to be repaid,” Kantrowitz says.

Seek forgiveness – and get debt help

Michael Kitchen, student debt expert and senior editor at Student Loan Hero, says the good news is that even a $90,000 obligation can be manageable by pursuing student loan forgiveness for your federal student loans (student loans tend not to have generous discount options). “If you work in a non-profit organization or for the government, then the Cancellation of civil service loans The program will erase your student loans after 10 years, including the time you haven’t made payments due to pandemic forbearance,” says Kitchen.

And you don’t have to stick to a restoration job. “Maybe another job in a non-profit or government office would be easier to get. People do not know their future income when they take out these loans and assume that they will earn more than they do. Fortunately, the job market is strong now,” says Diana Furchtgott-Roth, assistant professor of economics at George Washington University and former chief economist at the US Department of Labor.

  • Letters edited for brevity and clarity

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