Darren brings home around $5,000 a month after taxes and works a part-time job on top of that and Ariel currently stays home with their child. This makes that $300,000 of debt feel like an unclimbable mountain.
The couple called into The Ramsey Show looking for a way out and his advice was blunt.
Ramsey said there are two big changes that need to happen: increase your income and rethink where you live and work. If Ariel started working part-time or Darren moved to the private sector, they could bring in more income. Meanwhile moving to a lower cost-of-living area could lower their regular expenses and free up their budget for debt repayment (1).
When a degree doesn't pay for itself
While Ariel owes more than average for her student loans, her problem isn't uncommon. Student loan debt has become one of the biggest financial burdens facing Americans. According to the Education Data Initiative, 42.5 million borrowers carry federal student loan debt, with the average borrower owing $39,075 (2).
That being said, her student loan debt is evidence of a bigger issue. If a doctor is in $300,000 worth of student debt but making $250,000 a year, that is a much different situation. But for Ariel, there's a mismatch between what her degree cost and what the field actually pays.
Social workers earn a median of $61,330 a year, or about $29.49 an hour, according to the Bureau of Labor Statistics (3). At that salary, even if she used a significant chunk of every paycheck to pay her loans, it could take decades to pay them off.
Ariel's professors encouraged her to pursue Public Service Loan Forgiveness (PSLF). This program allows individuals employed by the government or non-profits to apply for student loan forgiveness after making 120 qualifying monthly payments on their loan while working for an eligible employer. Essentially, if you work for 10 years and make loan payments during that time, your loans can be forgiven (4).
However, the program has been targeted for cuts by political leaders and has a long backlog, so there are no guarantees.
What to do if you're in a mountain of student debt
The first lesson here is for anyone still in school, or considering going back: research the return on investment before you borrow money for a degree. If you're already in debt, here's where to start.
Look for ways to increase your income
The faster you can close the gap between what comes in and what goes out, the faster the debt disappears. A side hustle, a promotion or a career pivot are all viable ways to increase your income depending on what is best for you and your family.
