Can you really get out of massive debt?

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BanjoDonkey
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Can you really get out of massive debt?

Post by BanjoDonkey »

My cousin recently asked me to review her finances, specifically with the goal of her getting out from under her debt.

The debt is pretty large. I don't know all the details yet, but it's hundreds of thousands in just student loans. Let's say it's 300,000.

I understand the elements of getting out of debt, as I've done it for myself: Cut expenses and/or increase income. Renegotiate rates if possible. Also, I understand the significant psychological element of this.

However, when I read other posts about getting out of debt, the amount of debt people post about seems fairly small by comparison. Has anyone here actually gotten out from under this kind of massive debt?

I ask because I know more people in life who just carry their debt around even into retirement. Never getting debt-free; just servicing these massive balances. They survive, but their quality of living is pretty reduced. I really don't want that for my cousin.

She isn't a doctor or specialist with massive earning potential. She's in the tech industry and makes around 100k, maybe growing to 150k eventually.

I understand how she can get out of debt in theory. But does it ever actually happen in practice? And if so, what should I know in order to be the most helpful?
Not a millionaire, not a doctor, not a lawyer. Early 30s.
flyingcows
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Re: Can you really get out of massive debt?

Post by flyingcows »

You mentioned Tech Industry, what is her skillset/role, is she a software developer? If so there is the potential to increase earnings substantially from her current level if she is motivated to do so
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BanjoDonkey
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Re: Can you really get out of massive debt?

Post by BanjoDonkey »

flyingcows wrote: Thu Jan 30, 2025 7:29 am You mentioned Tech Industry, what is her skillset/role, is she a software developer? If so there is the potential to increase earnings substantially from her current level if she is motivated to do so
Without going into too much detail, her income will probably stay between 100-150k. Unless she makes a massive career change, which I don't expect.
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simplesimon
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Re: Can you really get out of massive debt?

Post by simplesimon »

BanjoDonkey wrote: Thu Jan 30, 2025 7:20 am They survive, but their quality of living is pretty reduced. I really don't want that for my cousin.
Yes it happens, of course, and those that make it happen set themselves up for a much better life than those that you fear she'll become.

The money has to come from somewhere, there's really no way around it. Nobody wants this kind of life but be brutally honest about the situation.

She can bite the bullet and get aggressive with repayment which will reduce her standard of living in the short term.

For federal loans, she can take a (presumably) lower paying job with a qualifying employer and get it forgiven.
Last edited by simplesimon on Thu Jan 30, 2025 7:46 am, edited 1 time in total.
Yarlonkol12
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Re: Can you really get out of massive debt?

Post by Yarlonkol12 »

simplesimon wrote: Thu Jan 30, 2025 7:35 am For federal loans, she can take a (presumably) lower paying job with a qualifying employer and get it forgiven.
That seems like an interesting option!

That said, what makes her so certain of her income potential only being 100-150k? I don't know where she works or what she does, but I will say It's possible to make many multiples of that in various roles at big tech companies, did she at least look at levels.fyi for an idea of what's possible?
Last edited by Yarlonkol12 on Thu Jan 30, 2025 7:45 am, edited 1 time in total.
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steadyosmosis
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Re: Can you really get out of massive debt?

Post by steadyosmosis »

Yes, if I had an income of $100k annually, I could be free from $300k debt within a few years.
Not unusual for Bogleheads to save/invest more than 50% of their gross income.
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Jack FFR1846
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Re: Can you really get out of massive debt?

Post by Jack FFR1846 »

A large percentage of Bogleheads have had this much debt and more. It's called a mortgage. She needs to Avalanche her debt. We did this and lived below our means and paid all our debt including the mortgage 20 years before we retired.

If she wants to make more money and is an engineer and can talk to people (rare for engineers), she could go into being a field applications engineer. I was one and I know there are a few other Bogleheads who are/were. I worked for chip companies and had a strong hardware design background. My job was multiple. It was to talk with customer engineers to do several things. Choose the best chip we had for their design, help analyze problems and help fix them. This can include lab work. Present products to groups of engineers. Travel is included in this job and the smaller the company, the more travel, likely on airplanes. My initial job doing this, I covered all of Canada and the northeast and some mid west US. Later, with larger companies, just New England. Pay is typical similar to that of a design engineer but bonuses and targets would sometimes double my pay. Lots of benefits that also added to pay like cell phone, home internet cost, a car plan, gas, mileage, etc. Chip companies pay more than assembled device companies like say power supply or disk drive companies. And the companies who pay the most are well known by private recruiter companies. RSUs are common and of course discounted ESPPs and matched 401k's as well. Because we're following sales to customers, it's pretty easy to work from home.
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sailaway
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Re: Can you really get out of massive debt?

Post by sailaway »

The debt to income is much more important than comparing the debt to what other people have.

Have they just graduated? If so, then their income probably has quite a bit of room for growth. If they are any good at their job, in the tech industry the best way to increase income is to generally to job hop. This means they should probably not buy a home for quite some time. Depending on their field, a masters may also be useful if they don't already have one. If they pursue this, it should be with the employers money (tuition reimbursement, but make sure it actually covers the vast majority of costs).

It is important to distinguish between cutting costs and cutting enjoyment. The most effective cost cutting is usually going to come from housing, transportation and food. If they have been dreaming of a house, a luxury car and nights out with friends, that news can feel devastating. Focus on spending that actually brings joy. While hard to implement, a no spend month can be amazing for taking a good look at what you miss and what free activities you come up with to fill your time. Find the cheapest housing you feel safe in, the cheapest reliable transportation and remember that rice and beans are actually very healthy if you don't have any underlying health conditions that make them a poor choice for you. Just learn to prepare them in ways that celebrate them.

While it can be tempting to try to throw everything at debt, an emergency fund is going to be critical for folks in the tech fields. Long term unemployment is more devastating than student debt for long term finances.

Obviously I do not know the financial situation of everyone around me, but I can honestly say that the people around me who admit to carrying student debt even close to retirement suffered from both long term unemployment and consistently poor financial choices. The latter will usually have a myriad of causes (ie, the one who turned to retail therapy in recovery), but one of those factors will often be that poverty mindset wherein constant stress and a constant feeling of depravation can lead to any available funds going to something that seems frivolous to outsiders because it is just going to disappear before you can save up for anything nice. An emergency fund and practicing gratitude seem to be the best antidotes to that mindset.
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Re: Can you really get out of massive debt?

Post by BanjoDonkey »

simplesimon wrote: Thu Jan 30, 2025 7:35 am The money has to come from somewhere, there's really no way around it. Nobody wants this kind of life but be brutally honest about the situation.

She can bite the bullet and get aggressive with repayment which will reduce her standard of living in the short term.
I was worried about being too brutal about it and turning her off. But I think she needs a pretty big reality check. The good news –- which I'll emphasize with her -- is that she has a good income and can get aggressive. At least in theory.
sailaway wrote: Thu Jan 30, 2025 7:55 am one of those factors will often be that poverty mindset wherein constant stress and a constant feeling of depravation can lead to any available funds going to something that seems frivolous to outsiders
This hits close to home.
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Vulcan0
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Re: Can you really get out of massive debt?

Post by Vulcan0 »

The short answer. Yes it is possible. Like you said, by reducing expenses to the lowest possible.

Long answer. She is unlikely to do so. I say this because her history indicates she is a spender. (Or at least she didn't mind spending a whole lot of money on education.) So she is unlikely to reduce her living cost to a bare minimum, which is a necessary, but maybe not sufficient, condition. That is unless she has a waking up moment. (I know this sounds judgmental but the truth needs to be told.)
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simplesimon
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Re: Can you really get out of massive debt?

Post by simplesimon »

BanjoDonkey wrote: Thu Jan 30, 2025 8:08 am
simplesimon wrote: Thu Jan 30, 2025 7:35 am The money has to come from somewhere, there's really no way around it. Nobody wants this kind of life but be brutally honest about the situation.

She can bite the bullet and get aggressive with repayment which will reduce her standard of living in the short term.
I was worried about being too brutal about it and turning her off. But I think she needs a pretty big reality check. The good news –- which I'll emphasize with her -- is that she has a good income and can get aggressive. At least in theory.
Just to be clear I'm not saying to not handle the situation with tact. :D

But she can't get out of the situation if not completely honest with herself.
CaptainT
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Re: Can you really get out of massive debt?

Post by CaptainT »

Certainly it happens. Dave Ramsey has built a huge successful buisness on helping people get out of massive debt. 300k on 100k income is doable but not a blink and it's done thing. In best case situation it will take 3 or 4 years.
How to do it.
Live on as little as possible think 40k or less.
Can she move back in with family and not have to pay rent?Put as much as possible towards debt every month. Work a side job on the weekends (maybe also evenings) make 25k or more a year to throw at debt.

Debt snowball (smallest to largest) and debt avalanche (largest interest rate to smallest interest rate) are both valid. Math says avalanche but snowball works for many people psychological

It won't be overnight but she can do it if she buckles down. It will be a total lifestyle switch.
Tamalak
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Re: Can you really get out of massive debt?

Post by Tamalak »

Rarely does the mindset to rack up $300k in debt coexist with the mindset to pay off $300k in debt.
hoofaman
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Re: Can you really get out of massive debt?

Post by hoofaman »

Is that debt all from Student loans and accumulated while she was a student with little/no-income I assume?

My first 10 years of my career I made around 100-125k/y and managed to save about 300k over that timeframe, 200k in retirement contributions and around 100k in taxable account contributions. I realize that's different than debt but I also didn't feel like I was sacrificing anything to reach that level of savings at the time, I probably could have saved much more if I put my mind to it.

That said the biggest financial mistake I made was sticking with that job for 10 years, even though I was getting good raises every year. I did some job hopping after that, and with the first jump I almost doubled my total compensation. In addition to paying off the debt it pays to be mindful of one's market value in the job market and always be looking for an upgrade opportunity. Some strategic job hopping can be hugely beneficial, it has it's risks but it is important to at minimum be aware of what else is out there in the tech industry
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Re: Can you really get out of massive debt?

Post by HooCares »

OP, what your cousin needs to hear is some tough love. It is typically unsustainable to carry debt more than 1x your income and she is carrying debt 2x-3x her income. If these weren't student loans her correct course of action would be to file for bankruptcy. Her $300k student loans are like having a $300k mortgage and a property that got sucked into a sinkhole. If she wants to get on with her life, she needs to pay off this mortgage.

Your cousin makes $100k-$150k? Ask her if there are people living on $50k-$75k. She needs to arrange her life to live like she makes 50% of what she makes and dump the other 50% into these loans. Even then, it will take the better part of a decade to do it. Assuming her loans average 7.5% interest and she goes on a 10-year repayment plan she is looking at $3600/mo. I wish her luck, but my guess is without some sort of windfall she will not make the progress you wish for her. I would highly encourage her to look for better earning jobs or a wealthy spouse.
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Kagord
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Re: Can you really get out of massive debt?

Post by Kagord »

Something for Nothing, by Robert Scheckley, should be required reading before any debt is taken on.
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WinstonTeracina
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Re: Can you really get out of massive debt?

Post by WinstonTeracina »

I feel for your cousin. As others have mentioned, accepting her reality and committing to a very frugal lifestyle is the only viable path forward. Given her $100K salary, this will be a decade-long journey at best—not something that can be resolved in just a few years, as some have suggested.

Saving 50% or more of her gross income isn't realistic, either practically or psychologically. After taxes, a $100K salary nets around $75K. Expecting her to put $50K per year toward debt while living on just $25K isn’t feasible. Even with aggressive payments, she may only be making a small dent since the debt will continue to accrue interest.

As others have pointed out, this situation is comparable to a mortgage—except without the benefit of homeownership. Most people who take on a mortgage three times their income don’t pay it off in 10 years, and unlike student loans, a mortgage at least provides housing.

It’s a tough road, but with discipline and a long-term plan, she can make progress.
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ryman554
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Re: Can you really get out of massive debt?

Post by ryman554 »

WinstonTeracina wrote: Thu Jan 30, 2025 8:57 am As others have pointed out, this situation is comparable to a mortgage—except without the benefit of homeownership. Most people who take on a mortgage three times their income don’t pay it off in 10 years, and unlike student loans, a mortgage at least provides housing.
But it's not comparable to a mortgage, and I was going to comment above, but this message was at the bottom and hints at why.

The single biggest expense a person typically has is housing. With a 300k mortgage, the person would have 30 years to pay off a loan while gaining the benefit of a place to live. Few pay it off in 10 years (tho I did!).

The OP cousin doesn't have a place to live, ergo the money that would go toward paying down the mortgage is needed for something like rent -- which in this particular home price market may not be a bad thing -- but that loses a bolus of money which c/would otherwise go toward paying down the 300k. That's going to make it hard.

The cousin makes <~150k a year? that's probably closer to a 33% overall tax rate (fed, state, FICA, ....) so at the general part of 1/3 tax, 1/3 save, 1/3 spend....

@150k: that's 4k/month to live, 50k/year to put toward the debt. Best to put aside $15k as emergency fund in the first year.
@100k: that's 3k/month to live, 30k/year to put toward the debt. Best to put aside $10k as emergency fund in the first year.

Both are doable, but it's not an extravagant life (needs roomies) especially if there is a car note needed, too. Note I'm not looking at putting away for retirement -- I suspect that's a bridge too far at this point, even without knowing the interest rate on the debt. If it's 10%, the cousin is fighting a losing battle and won't even make any headway at $100k salary. If it's 5%, the cousin will knock off up to $20k in that first year and they get a lesson in "compound interest doesn't compound as fast". But if the cousin *does not* deal with it, it's going to rapidly snowball out of control and there will be nothing to do about it. And it's not bankruptable, yeah? I know tables and graphs don't change hearts and minds, but if the OP does nothing else, they should show the consequence/impact to paying vs. not paying. There is a real chance in getting it dealt with, but the time is now. Can't wait.

Laser focus on career and getting that income up. Any bonus/RSU goes directly to debt. Revisit in a couple of years or so....
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Re: Can you really get out of massive debt?

Post by exodusNH »

steadyosmosis wrote: Thu Jan 30, 2025 7:44 am Yes, if I had an income of $100k annually, I could be free from $300k debt within a few years.
Not unusual for Bogleheads to save/invest more than 50% of their gross income.
The fraction of people earning $100,000 who could save 50% is ludicrously small.

$100,000 results in takehome of around $70,000. That's $5800/month. Housing is going to be dependent on location, but let's call it $1500. Insurance, electricity, food, let's call that $500/mo. (I can tell you that even in NH, food costs for two of us are more like $1200/mo and that's not for luxury food or alcohol.)

That leaves them, at best, $3800 in available income. Even if they were able to throw all of that at the debt, it's still 7 years.

Realistically, their free cash would be much lower. It's not reasonable to expect someone to sit in their house, eating rice and beans, and walking everywhere. The latter is especially important since nearly all places, and certainly places with the lowest rent, do not have reliable public transportation options.

Even in southern NH -- which doesn't have cheap rent -- you can't really get by without a car, unless you have friends/family willing to Drive Miss Daisy. Public transportation is basically non-existent. Taxis are expensive and unreliable. Uber is expensive and not always available.

Moving to a walkable city doesn't solve the problem because then your housing and food costs increase, probably netting out the transportation savings.
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Re: Can you really get out of massive debt?

Post by tashnewbie »

It's possible. It is not easy. But it's possible.

The same knowledge, wisdom, skills, and habits that are used to retire $50k of debt can be used to tackle $300k.

The same principle applies to something like weight loss.

Whether you have 20lbs or 100lbs to lose...the same basic principles apply. You will have to be more patient if you have more to lose.
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simplesimon
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Re: Can you really get out of massive debt?

Post by simplesimon »

exodusNH wrote: Thu Jan 30, 2025 9:25 am Housing is going to be dependent on location, but let's call it $1500.
Everybody's different but when I was young and single I was willing to live with multiple roommates to pay less than this in a HCOL city. I know someone paying less than $1k right now sharing an apartment in a Boston suburb that has subway access. My brother was in a similar situation living in Queens commuting to Manhattan. I think it's pretty common.

Someone making $100k with $300k in debt doesn't have many choices.
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Re: Can you really get out of massive debt?

Post by TomatoTomahto »

tashnewbie wrote: Thu Jan 30, 2025 9:27 am It's possible. It is not easy. But it's possible.

The same knowledge, wisdom, skills, and habits that are used to retire $50k of debt can be used to tackle $300k.

The same principle applies to something like weight loss.

Whether you have 20lbs or 100lbs to lose...the same basic principles apply. You will have to be more patient if you have more to lose.
The line that always comes to mind for me is “even a marathon begins with a first step.”
I get the FI part but not the RE part of FIRE.
torso2500
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Re: Can you really get out of massive debt?

Post by torso2500 »

at that student loan to income ratio, assuming loans are federal SLs, some options would be:

Investigate forgiveness program for the loans
Find a niche job within current field/lifestyle situation that allows for faster debt payment
Go for high reward job like some sort of lucrative sales
Crunch numbers on income based repayment of SLs and make plans for any taxable forgiveness at term end

Refinancing SLs is probably going to be more cons than pros
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Re: Can you really get out of massive debt?

Post by Dottie57 »

flyingcows wrote: Thu Jan 30, 2025 7:29 am You mentioned Tech Industry, what is her skillset/role, is she a software developer? If so there is the potential to increase earnings substantially from her current level if she is motivated to do so
Tech workers working in non tech industries don’t make the ginormous amounts seen at this web site.
Life is more than grinding it out in some drab office setting for an arbitrary number. This isn't a videogame where the higher score is better. -Nathan Drake
tashnewbie
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Re: Can you really get out of massive debt?

Post by tashnewbie »

TomatoTomahto wrote: Thu Jan 30, 2025 9:40 am
tashnewbie wrote: Thu Jan 30, 2025 9:27 am It's possible. It is not easy. But it's possible.

The same knowledge, wisdom, skills, and habits that are used to retire $50k of debt can be used to tackle $300k.

The same principle applies to something like weight loss.

Whether you have 20lbs or 100lbs to lose...the same basic principles apply. You will have to be more patient if you have more to lose.
The line that always comes to mind for me is “even a marathon begins with a first step.”
Very true
chinchin
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Re: Can you really get out of massive debt?

Post by chinchin »

At that income level, if they follow the Early Retirement Extreme method, it should be easy.

Rice and beans isn't just a meme.

https://forum.earlyretirementextreme.co ... hp?t=12614
https://earlyretirementextreme.com/how-we-eat.html
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SantaClaraSurfer
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Re: Can you really get out of massive debt?

Post by SantaClaraSurfer »

My spouse and I got rid of six figure debt.

We did it with two teens at home, too.

We used the Dave Ramsey book and approach (cash in envelopes).

We chose to use a spreadsheet and focus on paying the highest interest rate debt first.

For everything else, we paid out cash.

We created a monthly budget, anticipated every expense (birthdays and Christmas were cash only affairs) and allowed for some small fun money and plans.

It took four years. During which time we both increased our income, which helped.

I'd say the good habits and communication we learned in this process set us up very well going forward.

Monthly budgeting, more than any other factor, has been our path to financial health.

All that money that had gone to debt paydown easily converted over to 401(k) contributions and taxable accounts.

We still have the $1,000 I bond we purchased at TD and the $1,000 in SCHB we purchased at Schwab with our first month free of debt.

That, plus the sinking funds we use to pay for all the "fun stuff" in life, are all the lesson we need to keep going on this path.
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Re: Can you really get out of massive debt?

Post by flyingcows »

Dottie57 wrote: Thu Jan 30, 2025 9:58 am
flyingcows wrote: Thu Jan 30, 2025 7:29 am You mentioned Tech Industry, what is her skillset/role, is she a software developer? If so there is the potential to increase earnings substantially from her current level if she is motivated to do so
Tech workers working in non tech industries don’t make the ginormous amounts seen at this web site.
That's true, although the possibility exists for those individuals to change employers if they want to do that, I was in a similar situation about 10 years ago
Mike Scott
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Re: Can you really get out of massive debt?

Post by Mike Scott »

If you can't figure out a way to pay it off, it is very difficult to discharge student loan debt. You could choose to not pay it and live in "collections" forever but that is probably not a great choice for many reasons. Explore the various ways to minimize the payments and accept that this debt will be with you for most of the rest of your life and it may capture tax refunds and social security to some degree until it is paid. It is a payment based on previous life choices. I believe that student loan debt is canceled on the death of the borrower so the debt does not transfer to anyone else if it is not paid off. Accept that it may mean never being able to buy a house or have a credit score that gives access to any kind of favorable financing. It becomes one of the defining features of your financial life for a long time so you can work with it or accept the negative consequences.
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Re: Can you really get out of massive debt?

Post by smitcat »

BanjoDonkey wrote: Thu Jan 30, 2025 7:31 am
flyingcows wrote: Thu Jan 30, 2025 7:29 am You mentioned Tech Industry, what is her skillset/role, is she a software developer? If so there is the potential to increase earnings substantially from her current level if she is motivated to do so
Without going into too much detail, her income will probably stay between 100-150k. Unless she makes a massive career change, which I don't expect.
The math is important...
What is the interest rate on the $300K debt? What are the terms of that debt? As a best guess what are the lowest 'negotiated' rates and terms that could be expected from this situation?
LittleMaggieMae
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Re: Can you really get out of massive debt?

Post by LittleMaggieMae »

I think it comes down to the person(s) age, income (and their ability to maintain it or increase it), the type of debt(s) they have, and the way they think/feel about debt and money. Is being in debt a "moral failing"? Is using bankruptcy or foreclosure a "moral failing"? Is debt a tool you need to learn how to use?

Getting out of debt often has an emotional/mental component. Learning to maintain your financial life also has emotional/mental components.

As you are helping your cousin you may bump into some of those emotional/mental things that your cousin may need to work through. Be kind. Be compassionate.
bloom2708
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Re: Can you really get out of massive debt?

Post by bloom2708 »

Mike Scott wrote: Thu Jan 30, 2025 10:36 am If you can't figure out a way to pay it off, it is very difficult to discharge student loan debt. You could choose to not pay it and live in "collections" forever but that is probably not a great choice for many reasons. Explore the various ways to minimize the payments and accept that this debt will be with you for most of the rest of your life and it may capture tax refunds and social security to some degree until it is paid. It is a payment based on previous life choices. I believe that student loan debt is canceled on the death of the borrower so the debt does not transfer to anyone else if it is not paid off. Accept that it may mean never being able to buy a house or have a credit score that gives access to any kind of favorable financing. It becomes one of the defining features of your financial life for a long time so you can work with it or accept the negative consequences.
This. Student loan debt will be with you forever.

My cousin stopped paying his student loans in the late 1990s. He is 53 now and they are still there growing. He got divorced and sends a payment now and then. Kind of a sad state.

The basic way would be to minimize all other expenses. Buy and read The Total Money Makeover by Dave Ramsey. Start the snowball and do not dig any further by buying a car or house or anything really. I'd lock up the credit cards and live off cash.

People have paid off more but it will require some dedication. Coming out the other side will be sweet though.
smitcat
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Re: Can you really get out of massive debt?

Post by smitcat »

Mike Scott wrote: Thu Jan 30, 2025 10:36 am If you can't figure out a way to pay it off, it is very difficult to discharge student loan debt. You could choose to not pay it and live in "collections" forever but that is probably not a great choice for many reasons. Explore the various ways to minimize the payments and accept that this debt will be with you for most of the rest of your life and it may capture tax refunds and social security to some degree until it is paid. It is a payment based on previous life choices. I believe that student loan debt is canceled on the death of the borrower so the debt does not transfer to anyone else if it is not paid off. Accept that it may mean never being able to buy a house or have a credit score that gives access to any kind of favorable financing. It becomes one of the defining features of your financial life for a long time so you can work with it or accept the negative consequences.
Maybe it has changed ...but the student loand debt was not 'relieved' when the borrower passed on in our experience.
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Re: Can you really get out of massive debt?

Post by exodusNH »

smitcat wrote: Thu Jan 30, 2025 10:46 am
Mike Scott wrote: Thu Jan 30, 2025 10:36 am If you can't figure out a way to pay it off, it is very difficult to discharge student loan debt. You could choose to not pay it and live in "collections" forever but that is probably not a great choice for many reasons. Explore the various ways to minimize the payments and accept that this debt will be with you for most of the rest of your life and it may capture tax refunds and social security to some degree until it is paid. It is a payment based on previous life choices. I believe that student loan debt is canceled on the death of the borrower so the debt does not transfer to anyone else if it is not paid off. Accept that it may mean never being able to buy a house or have a credit score that gives access to any kind of favorable financing. It becomes one of the defining features of your financial life for a long time so you can work with it or accept the negative consequences.
Maybe it has changed ...but the student loand debt was not 'relieved' when the borrower passed on in our experience.
The borrower's estate may owe the debt, but if they had nothing, there's nothing to collect. It's not like the debt falls to their children, like some sort of generational stain.
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Re: Can you really get out of massive debt?

Post by sailaway »

exodusNH wrote: Thu Jan 30, 2025 10:54 am
smitcat wrote: Thu Jan 30, 2025 10:46 am

Maybe it has changed ...but the student loand debt was not 'relieved' when the borrower passed on in our experience.
The borrower's estate may owe the debt, but if they had nothing, there's nothing to collect. It's not like the debt falls to their children, like some sort of generational stain.
Federal student loans are discharged at death. However, this does not apply to parental loans nor private loans.
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Re: Can you really get out of massive debt?

Post by BrooklynInvest »

Of course she can.

The challenge is living a lifestyle that facilitates this. I made stupid spending decisions after college. I worked very long hours for not a ton of money. I "deserved" a few nights out, I "deserved" some better clothes and I "deserved" a vacation or two. I was in a significant (for me) credit card hole fairly quickly and the interest was accumulating.

A couple of years of more spartan existence, a room-mate and no vacations and I had righted the ship. I was still close to broke, but what very little was left went into savings and an underfunded but existent 401k. Compounding eventually started to work in my favor.

I don't think it's "keeping up with the Joneses" that got me in trouble. It really was that my sense of normal behavior and normal debt was wrong and destructive.

Good luck OP,
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Re: Can you really get out of massive debt?

Post by ScubaHogg »

exodusNH wrote: Thu Jan 30, 2025 9:25 am
steadyosmosis wrote: Thu Jan 30, 2025 7:44 am Yes, if I had an income of $100k annually, I could be free from $300k debt within a few years.
Not unusual for Bogleheads to save/invest more than 50% of their gross income.
The fraction of people earning $100,000 who could save 50% is ludicrously small.

$100,000 results in takehome of around $70,000. That's $5800/month.
I think y’all are likely overstating the effective tax rate of a single person
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Re: Can you really get out of massive debt?

Post by ScubaHogg »

exodusNH wrote: Thu Jan 30, 2025 9:25 am Housing is going to be dependent on location, but let's call it $1500.
I live in a very nice area. But unlike others we actually allow people to build around here. As a result, with a roommate, the OPs hosing cost could easily be half of this for a very nice, two bedroom place
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Re: Can you really get out of massive debt?

Post by sailaway »

ScubaHogg wrote: Thu Jan 30, 2025 11:37 am
exodusNH wrote: Thu Jan 30, 2025 9:25 am Housing is going to be dependent on location, but let's call it $1500.
I live in a very nice area. But unlike others we actually allow people to build around here. As a result, with a roommate, the OPs hosing cost could easily be half of this for a very nice, two bedroom place
I don't remember the last time I saw a market where a two bedroom was anywhere close to double a one bedroom. In our local market, the difference tends to be within 10%. Having a roommate can be an enormous savings. Heck, in some cases a 3 bedroom house might be cheaper than a two bedroom apartment. You can have another roommate or more space, but watch out for utilities if you choose the latter.
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Re: Can you really get out of massive debt?

Post by WeakOldGuy »

42 years ago I graduated with significant student loan debt. The interest rate on that debt was 7%. Both my wife and I had low incomes. We were able to get out of debt by simply continuing to live the "poor student" lifestyle for a number of years. Yes it was challenging. We both were paid monthly and there were lots of months when we ran out of money before we ran out of month. We were very familiar with the float time on checks written at the grocery store.

She will need to accept the reality that her debt will take diligent work to pay off. It will affect her lifestyle. Dept=lack of freedom. The sooner she can be free of that debt, the sooner she will have more options in her life.
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Re: Can you really get out of massive debt?

Post by Darth Xanadu »

I don't have any personally relevant experience to share with OP, but I suspect the path below, assuming job options and geographies align, is the most realistic way to address this massive debt within a reasonable timeframe.
CaptainT wrote: Thu Jan 30, 2025 8:14 am
Can she move back in with family and not have to pay rent?Put as much as possible towards debt every month. Work a side job on the weekends (maybe also evenings) make 25k or more a year to throw at debt.
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Re: Can you really get out of massive debt?

Post by retire57 »

Not if she's not motivated.
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Re: Can you really get out of massive debt?

Post by torso2500 »

There are a lot of different applicable rules/options for student loans, so it heavily depends on what the makeup of cousin's student debts are. Federal loans have several different repayment plans with different exit strategies, whereas private loans tend to be less flexible.
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Re: Can you really get out of massive debt?

Post by smitcat »

exodusNH wrote: Thu Jan 30, 2025 10:54 am
smitcat wrote: Thu Jan 30, 2025 10:46 am

Maybe it has changed ...but the student loand debt was not 'relieved' when the borrower passed on in our experience.
The borrower's estate may owe the debt, but if they had nothing, there's nothing to collect. It's not like the debt falls to their children, like some sort of generational stain.
It actually fell to the parents.... as co-signers.
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Re: Can you really get out of massive debt?

Post by smitcat »

ScubaHogg wrote: Thu Jan 30, 2025 11:32 am
exodusNH wrote: Thu Jan 30, 2025 9:25 am

The fraction of people earning $100,000 who could save 50% is ludicrously small.

$100,000 results in takehome of around $70,000. That's $5800/month.
I think y’all are likely overstating the effective tax rate of a single person
NY state and single at $100K would be about $73.5 after Fed/State/FICA.
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Re: Can you really get out of massive debt?

Post by torso2500 »

smitcat wrote: Thu Jan 30, 2025 1:04 pm
exodusNH wrote: Thu Jan 30, 2025 10:54 am

The borrower's estate may owe the debt, but if they had nothing, there's nothing to collect. It's not like the debt falls to their children, like some sort of generational stain.
It actually fell to the parents.... as co-signers.
So your experience was not one that the borrower (aka all persons signed on as debtor) on the loans passed away then...
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Re: Can you really get out of massive debt?

Post by White Coat Investor »

BanjoDonkey wrote: Thu Jan 30, 2025 7:20 am My cousin recently asked me to review her finances, specifically with the goal of her getting out from under her debt.

The debt is pretty large. I don't know all the details yet, but it's hundreds of thousands in just student loans. Let's say it's 300,000.

I understand the elements of getting out of debt, as I've done it for myself: Cut expenses and/or increase income. Renegotiate rates if possible. Also, I understand the significant psychological element of this.

However, when I read other posts about getting out of debt, the amount of debt people post about seems fairly small by comparison. Has anyone here actually gotten out from under this kind of massive debt?

I ask because I know more people in life who just carry their debt around even into retirement. Never getting debt-free; just servicing these massive balances. They survive, but their quality of living is pretty reduced. I really don't want that for my cousin.

She isn't a doctor or specialist with massive earning potential. She's in the tech industry and makes around 100k, maybe growing to 150k eventually.

I understand how she can get out of debt in theory. But does it ever actually happen in practice? And if so, what should I know in order to be the most helpful?
It's either PSLF or austerity (make more, spend less and send the difference to the lender). Her choice. Docs face this issue all the time. Usually with a higher income for sure, but it's a similar issue.
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Re: Can you really get out of massive debt?

Post by ScubaHogg »

I’d add that if she can start putting $30K towards the debt, then her income grows to $150K like the OP says is possible, she could easily throw $50-60k/year at the debt

This is eminently doable. Not fun but doable.
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Re: Can you really get out of massive debt?

Post by LittleMaggieMae »

smitcat wrote: Thu Jan 30, 2025 1:08 pm
ScubaHogg wrote: Thu Jan 30, 2025 11:32 am

I think y’all are likely overstating the effective tax rate of a single person
NY state and single at $100K would be about $73.5 after Fed/State/FICA.
What about the cost of health insurance? And dental/vision insurance? My Corporate Employer is generous and as a singleton I've paid a lot less for my health insurance (and had better coverage/lower costs) than singleton friends at smaller employers over the course of my career. One singleton was paying $250 a paycheck for health insurance (that was a long time ago...) maybe employers are able to offer really inexpensive healthcare options??
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Re: Can you really get out of massive debt?

Post by skipper »

Since you know the principles of becoming debt-free, my helpful hints would be:
  • Just considering the student loan part, don't think or talk of it as debt or a black cloud you have to "get out from under" anymore; just consider it a bill that has to be paid for education services rendered and be thankful she didn't have to pay for it out of pocket. Be positive about it, like paying the light bill every month forever, it's just another bill out there that has to be paid. We all pay for utilities our entire lives and have nothing to show for it at the end; no one complains. Interest is like the energy or fuel surcharge.
  • Make a simple budget. Gross - taxes = Take home - living essentials - discretionary allowance you can live with = loan payment. We don't have enough information to figure payments and length, but the concept is the same as BH investing; set a SWAN budget and stay the course. The allowance doesn't have to be broken down to detail, just a fixed amount that let's one enjoy modest living or deal with an emergency and buckle down until next payday.
  • It's not ideal, but there's no room for savings/investing or emergency fund in this scenario. I went my first 25 years of employment without either, while building up CC debt that was 0.75x my pay (mid-5 digits). I paid it off in three years, then paid off the mortgage, then started investing. I had a few windfalls in there that helped and she may have some windfalls as well; use those to help pay the bills and stay on the plan. I'm not where I would like to be in my retirement savings, but learning to pay down that debt and live on less has helped me play catchup and max out all my savings opportunities now.
  • Own it. Loan payback is a responsibility for responsible people. It's a growth opportunity. It's a challenge; a test of character. A big bill like this is nothing to be ashamed of if you pay what you owe. Not everyone can do it or would do it, but it's always possible. Doesn't take any skill, just determination.
Good luck OP
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