$80K in Student Loans... Now What?

LadyMillionaire · Jul 19, 2011

I am 28. In undergrad I racked up $20K in student loans, worked for a year and then went back to an art school for 2 years without a job and added $48K to my student loan tab. I couldn't find a job and didn't have the wherewithal to find a source of income so of course the interest payments have starting multiplying over the last couple of years. I am currently at $78,000.

I have had to move back in with my parents while I work a 9-5 that I hate and started a website that earns money but requires too much work to maintain traffic levels. In Fastlane, MJ speaks of moving to another state to jump start his life. I'm seriously contemplating it.

I have saved about $12,000 and if I hadn't read MJ's book, I'd probably use it as a down payment on a house or to pay down my student loan debt but now I have a great idea for an internet business. I have requested quotes from several web programmers and it looks like that's about how much it would cost to build the website. It's very scary and it's kind of a gamble. There's nothing like it in my niche, but I've seen it work extremely well in other niches.

Anybody have any tips or words of wisdom as I embark on the next few months of LIFE CHANGING decisions?

Please share!

Rawr · Jul 19, 2011

Congrats on thinking up something new, and taking the first steps. Seems like you are a little over the place - questions like "should i buy a house, pay off loan or invest in a biz" are pretty far apart. I would go for the biz, with a shoestring budget, meaning I'd act as if I had less than typically needed so I don't blow it on unnecessary things. So if it's 12k I would think - "Hmm, what if I had 6k only, how would I do this differently?"

You can also move and start the business.

You probably know how it works - first + last+ security deposit - so 2-3k out for that, but now you are covered for 2 months at least to decide if the place is working and if you are working on that biz...

Jeremy C. Jones · Jul 19, 2011

Student loans

I can relate to that, I got my bachelors after getting out of the military thinking that I would not need any student loans, but to supplement I ended up needing an extra $40k in students loans. I couldn't land a good paying job and wanted to start an online business. Found a way to cut the major expenses of an online business by using social media and I'll have my student loans payed off in 2 yrs!

recently I started another company where I teach people how to get started: http://goo.gl/0iDlc

let me know if you have any specific questions.
-Jeremy
jeremy3102@gmail.com

LadyMillionaire said:
I am 28. In undergrad I racked up $20K in student loans, worked for a year and then went back to an art school for 2 years without a job and added $48K to my student loan tab. I couldn't find a job and didn't have the wherewithal to find a source of income so of course the interest payments have starting multiplying over the last couple of years. I am currently at $78,000.

I have had to move back in with my parents while I work a 9-5 that I hate and started a website that earns money but requires too much work to maintain traffic levels. In Fastlane, MJ speaks of moving to another state to jump start his life. I'm seriously contemplating it.

I have saved about $12,000 and if I hadn't read MJ's book, I'd probably use it as a down payment on a house or to pay down my student loan debt but now I have a great idea for an internet business. I have requested quotes from several web programmers and it looks like that's about how much it would cost to build the website. It's very scary and it's kind of a gamble. There's nothing like it in my niche, but I've seen it work extremely well in other niches.

Anybody have any tips or words of wisdom as I embark on the next few months of LIFE CHANGING decisions?

Please share!

Graves · Jul 19, 2011

In undergrad I racked up $20K in student loans, worked for a year and then went back to an art school for 2 years without a job and added $48K to my student loan tab

Ouch, that's tough.
I would stay home and build the website.

BeachBoy · Jul 19, 2011

I had over $60k debt and I am now at $15k, almost done (I'm 31 now).

I think you need to find a fastlane ideas that won't cost much... and reimburse your debts as much as possible during the time that you build your project.

internet projects are the top ones, where you can learn and create in all your spare times. not it's not as full time as MJ would like, but when you owe 80 grand, you need to make some payments and have money to eat... hence the low cost project... a computer, web hosting, domain name and a ton of internet resources... what's important is the right idea!

That's what I'm doing... full time job plus evening and weekends on my project and small business. it's a little slower than leaving my job, but it certainly reimburses my debt faster than waiting to hit the jackpot with a fastlane project.

good luck!

James Fake · Jul 20, 2011

Hint: 12K is not a huge sum of money, so if you plan on 1 startup with it; it better succeed.

If I were you, I would boostrap the crap out of that money, learn some frontend web design like tweaking wordpress, etc. pay half that into development fees and do 2 separate startups. If the first fails, then try the 2nd.

hakrjak · Jul 20, 2011

We feel your pain. Between my wife and I, we now have about $170,000 in student loans. You haven't lived until you've been blind sided by an extra $1000/month payment that hits you out of nowhere. Even worse, that the government consideres household income when they figure out what your student loan payment should be and they don't just consider the person who's loans it is. Not even sure how that's legal!

Anyway, the only advice I have is to refi to the lowest rate possible and make minimum payments until the end of time. There are some government programs out there now that if you go to work in public service for cities, local governments, states, etc -- they will pay off your loans after 10 years, or they'll offer you a large sum of money up front if you agree to stay for 2 years. My wife is currently considering an offer of $125,000 in exchange for signing a contract to continue working for the state of Colorado for 2 years. These programs depend on your skill level and expertise though -- she's a Neuropsychologist PHD.

Cheers,

- Hakrjak

Jeremy C. Jones · Jul 20, 2011

Hakrjak....ouch! best of luck to you, sounds like you have a handle on it.

LadyMillionaire · Jul 21, 2011

hakrjak said:
We feel your pain. Between my wife and I, we now have about $170,000 in student loans. You haven't lived until you've been blind sided by an extra $1000/month payment that hits you out of nowhere. Even worse, that the government consideres household income when they figure out what your student loan payment should be and they don't just consider the person who's loans it is. Not even sure how that's legal!

Anyway, the only advice I have is to refi to the lowest rate possible and make minimum payments until the end of time. There are some government programs out there now that if you go to work in public service for cities, local governments, states, etc -- they will pay off your loans after 10 years, or they'll offer you a large sum of money up front if you agree to stay for 2 years. My wife is currently considering an offer of $125,000 in exchange for signing a contract to continue working for the state of Colorado for 2 years. These programs depend on your skill level and expertise though -- she's a Neuropsychologist PHD.

Cheers,

- Hakrjak

Unfortunately, I have PRIVATE STUDENT LOANS which is the biggest mistake I've ever made. Refinancing is not possible. Loan Forgiveness is not possible. What is available to me would be less than $5000 so it's not worth my time. I refuse to work at a job I hate for 10 years to get $5000, no thanks. I am bootstrapping the startup and living at home until I get it off the ground. Starting a fastlane business is an absolute necessity at this point. Everything happens for a reason and maybe the forces that be put me in this situation to open my eyes to entrepreneurship and the possibility of traveling the road less traveled.

IamDave · Jul 21, 2011

LadyMillionaire said:
Unfortunately, I have PRIVATE STUDENT LOANS which is the biggest mistake I've ever made. Refinancing is not possible. Loan Forgiveness is not possible. What is available to me would be less than $5000 so it's not worth my time. I refuse to work at a job I hate for 10 years to get $5000, no thanks. I am bootstrapping the startup and living at home until I get it off the ground. Starting a fastlane business is an absolute necessity at this point. Everything happens for a reason and maybe the forces that be put me in this situation to open my eyes to entrepreneurship and the possibility of traveling the road less traveled.

You are not alone in your pain and need for change, remember that, and use it to focus your efforts.

I'm in exactly the same boat as you. About $80k in private loans, a 9-5 that keeps me fed and sheltered, and an internet business that I'm currently trying to start. I'm lucky though that I can do the web design and development myself (at least for an alpha/beta release). So if you need advise or insight about anything related to what you are looking for, whether it's price, time, or requirements, definitely shoot me a message. I'm happy to help out someone who's going through the same hell as I am.

The other tips here are absolutely correct, bootstrap the hell out of it. I'm starting small with a limited release, a few initial customers that volunteered to use it as alpha-testers. I'll then build a larger more refined first version based on their feedback, usage and the experience I gain from interacting with them. It's slow, yes, but it forces you to be in complete control which is great.

Again, I'm happy to help if you need advice regarding design or development, and I'm sure you'll find many others here as well.

hakrjak · Jul 22, 2011

LadyMillionaire said:
Unfortunately, I have PRIVATE STUDENT LOANS which is the biggest mistake I've ever made. Refinancing is not possible. Loan Forgiveness is not possible. What is available to me would be less than $5000 so it's not worth my time. I refuse to work at a job I hate for 10 years to get $5000, no thanks. I am bootstrapping the startup and living at home until I get it off the ground. Starting a fastlane business is an absolute necessity at this point. Everything happens for a reason and maybe the forces that be put me in this situation to open my eyes to entrepreneurship and the possibility of traveling the road less traveled.

Amen... Private loans are a freaking sham... We did worse than that, after being turned away by several lenders (Even though we qualified for the grad plus program, and later got approved for it) -- we ended up putting about $15k of tuition on credit cards just to finish the program and get out, so my wife could start earning big sweet dollars. We're now paying that back aggresively, but it's a debt that is going to hang over our heads for awhile.

Student debt is the new bubble, and the whole country is going to have a bad hangover from this one day. It's being treated as easy free money that anyway with a heartbeat can get approved for -- and we all know how well that worked for the sub prime mortgage lenders!!!!!

- Hakrjak

Ska2free · Jul 22, 2011

I'm not sure if you can do this with your student loans, but with mine, I qualified for a super low income adjusted payment plan at first. It's not a good long term strategy for everyone, bc you're just delaying the time that you will have even bigger payments...but if you are committed to a startup (kudos!), it may buy you some time in the short term.

Basically you approach the lender and say 'hey, my income is so low I can't make your payments, can we negotiate a lower payment for now?'. The govt backed loan programs do this so often there's a form for it. If you are actively funding your startup, you may be able to deduct business expenses from your income to qualify for lowest payment. Look on Sallie Mae's website for info on their program, then see if you can get your lender to do something similar.

I had 40k in loans, was able to get down to a $200/mo payment. The bank never asked if my income improved, and I never volunteered the info, then after about 10 years and getting my business successful, I was able to just write a check to payoff the balance. (even though mine were fairly low interest, the moment of paying them off ranks up there with some of the best feelings n life!)

hakrjak · Jul 22, 2011

We have friends who have worked this loophole also. They refi'd when the prior year they had only made about $12k combined. They got a payment of $200 on $200k of student loans.

Meanwhile we refi'd when my wife only made $10k last year (during internship), but they consider household income -- So my 6 figure income blew up the calculation and we got shafted with an $850/mo bill. (Even though they didn't consider payments I have to make to my ex, our bills, etc) -- Talk about a nightmare. The system is definitely broken!

Thankfully my wife was able to find a job for post-doc this year or we would have been screwed big time! We're able to pay the bills, which is good -- but we're certainly not getting much of a return on all that educational investment yet. Hoping she can complete post-doc and jump to a 6 figure job herself in the next 12 months.

LadyMillionaire · Jul 23, 2011

I haven't thought about refinancing. I don't know if I can. The interest on my loan is over 4.25%.

I'd love to brainstorm loopholes. I already thought of a crowdfunding site for normal everyday people to help other people pay off their student loans kind of in the same vein as KICKSTARTER.com, but specifically for student loan debt. I actually polled my readers and over 60% of them said they'd be willing to donate $10-20 a month to help other people pay of their student loans. It doesn't seem like a lot, but 10,000 people donating $10 can pay off a $100,000 student loan. In return, the people who have been helped have to donate back into the organization or maybe they volunteer in exchange for donations to their pay off. If it's a non profit and the donations can be tax deductible, people might be willing to donate larger amounts, companies might even sponsor certain people.

If you think about it... there really is no help for people with ridiculous student loans. Many of these people could do so much more in the world if they weren't working their buts off in the slowlane to fund their education.

Strewth&Dodgy · Jul 24, 2011

Hi LadyMillionaire,

1) 12K (USD?!!) seems to be a LOT of money for website development. I'm guessing it is a complex site?? Take a closer look elsewhere to see what you can find. I'd definately go overseas for this as the US is expensive. If you go this route it might be best to start with a much smaller project so you get the hang of it.
Cheapest site to outsource stuff on is fiverr.com I take it you've heard of it? It is a site where people offer to do all kinds of things for $5 and it is addictive as hell! Anything from having a website built (wordpress clone they built at a click or two and get $160 from an affiliate program such as hostgator) to people wearing signs around their neck promoting your business. I'm gonna order our next family portrait from there from this dude who alters the photo so we will look like Na'vi (blue creatures from Avatar).

2) Traffic shouldn't be all that time consuming especially if you have a system down. Check out IM forums to figure out how to outsource this to free up your time / or scale the operation so you get more traffic. If your site is making money regularly then you have accomplished something that most people who venture into IM never do - congrats!

LadyMillionaire · Jul 25, 2011

Strewth&Dodgy,

I am not spending $12K on the site, probably $5K at the most. It is very complicated and I'm not just building a static website, it's more like a social network so I need to work with professionals that know what they are doing. Fiverrr is a cool idea, but what I need to have done... I don't trust anybody who'd do it for $5. $5 a minute is more realistic. I just don't have the time to tinker with something because it's cool... even if it is only $5. I am working with programmers from India.

I think if MJ could sell limos.com for $3-7M, the site that I am building in this niche will probably sell for $25M or more in the next 5-10 years. It's something that everyone uses... I have no doubt that it will work, but time is of the essence.

I much rather spend $5K up front and have a professional take care of it rather than it take me months or years to learn the programming language. When I turn a profit from the site, I'd most likely always outsource the programming and just handle the Marketing/Social Media myself.

Strewth&Dodgy · Jul 26, 2011

Awesome!

*Cha-ching*

davidstorm · Jul 26, 2011

It is difficult for those of us who entered Indentured Servitude when we were younger to start fresh later. I am paying off student loans myself, and have had to get over some anger at my dumb past decisions. I am definitely spreading the word that college is quickly becoming a scam for most people, except those who are in inexpensive programs that train a person for jobs that are in high demand. That any school would encourage someone to go into debt almost $50,000 for an art degree shows that colleges are all about money and not about realistically training people to be successful in life. And I am not judging you, trust me. I went into debt for a similar amount for a similar degree.

To your question, $12,000 is pretty high for a website. A friend of mine used the Odesk website to find a web-developer in Latvia who designed a full page template for $400. Once he designed the basic template, my friend could then re-use that over and over for his different pages. This requires a basic knowledge of HTML (to insert text into the code) and how hosting, FTP, etc works, but that is not difficult to learn. Good luck!

davidstorm · Jul 26, 2011

LadyMillionaire,

I just noticed you were working with an Indian Developer, so my suggestion of Odesk is probably something you already know about. At any rate, good luck with your new venture!

hakrjak · Jul 27, 2011

davidstorm said:
It is difficult for those of us who entered Indentured Servitude when we were younger to start fresh later. I am paying off student loans myself, and have had to get over some anger at my dumb past decisions. I am definitely spreading the word that college is quickly becoming a scam for most people, except those who are in inexpensive programs that train a person for jobs that are in high demand. That any school would encourage someone to go into debt almost $50,000 for an art degree shows that colleges are all about money and not about realistically training people to be successful in life. And I am not judging you, trust me. I went into debt for a similar amount for a similar degree.

Amen... My wife is one of many doctors I know who say that if they knew then what they know now about cuts to medicare reimbursement, and lack of good paying jobs in her field -- there is no way in hell she would have ever entered a PHD program and racked up $170k of debt. Now that it's done though, there is no Monday morning QB'ing -- it's time to utilize that degree the most profitable way we can figure out how!

Lights · Jul 31, 2011

My question is... why art school?

you can learn art for free.

hakrjak · Jul 31, 2011

Lights said:
My question is... why art school?

you can learn art for free.

I would have flipped out if one of my kids ever comes to me and asks to attend art school. LOL - that's just me though

valuegiver · Jul 31, 2011

Listen to How SEOmoz’s Founder Went From Deep Debt To $4+ Mil Per Year – with Rand Fishkin | Business Tips

Rand went default on his loan, and now he is a founder of a multi million dollar business.

heidiswan · Jul 31, 2011

I feel for all of you with student loans. Recently a friend of mine was explaining a new program that actually helps people pay off their debts. He did mention student loans as one of the debt that people can enroll. As I am going through bankruptcy myself I only listened with "one" ear. So there are ways to accelerate the pay-off.

Boston3432 · Jul 31, 2011

I'm in a similar boat as you. I'll be a senior in college this year and once I graduate in the spring I am going to be right around 80k in the hole. I have some ideas of websites to create and have been doing lots of reading and research lately to try and learn most of it on my own, as I don't have much money saved up at all to put towards it at this point in time. Hopefully I can get a website off the ground within the next few months after researching, reading and talking to different people. Good luck!

Lights · Jul 31, 2011

hakrjak said:
I would have flipped out if one of my kids ever comes to me and asks to attend art school. LOL - that's just me though

I wouldn't raise my kids to even think that art school is a wise decision... it's worse than gambling almost.

I honestly don't feel for the OP on this mistake, the degree doesn't pay, this is just a foolish decision.

There will always be better artists, who didn't even went to school. You don't need to go to school for this.... seriously.

LadyMillionaire · Aug 1, 2011

Not that any of this is relevant to making money in the fastlane. Well, maybe it does. I used the term art school to simplify things. It was a top tier advertising portfolio school where some of the top Creative Directors for ad agencies go to hone their skills and create portfolios. Creative Directors in ad agencies on average make over 6 figures at the time I decided to go. I learned a lot of valuable skills that are actually helping me make money today like all the design software, web design, interactive design, studio photography, copywriting, editorial design, product design and much more. I don't regret going at all but even though I had scholarships, I lived far above my means.

If MJ made between $3-7 million selling Limos.com I'm pretty sure that in 5 years I can sell my site upwards of $25 million no doubt. If I didn't have so much debt I would have never had this brilliant idea.

Pete799p · Aug 26, 2011

I 100% think that college is a complete waste unless you know exactly what you want to get into and you are in a top tier school. I am lucky to not have student loan debt but graduated from an obscure school that over charged the hell out of us and gave us little in return. I learned nothing about finance that can be applied beyond theoretical bs that anybody with an internet connection could learn. When does the market ever trade mathematically perfect that's why it is called a "theoretical" portfolio. I told everybody while I was in college how much of a waste it was and how little I was learning but everybody just told me to do it because that is what I needed to be successful. BS. Anyways, my brother graduated with a 4.0 from ivy then a 4.0 from a top ten law school and has done well for himself.

I love those entrepreneurs who have started to pay students to drop out of school and start a business. I cannot wait to be one of them.

anarchotrader · Aug 26, 2011

Pete799p said:
I love those entrepreneurs who have started to pay students to drop out of school and start a business. I cannot wait to be one of them.

Gimme their names

hakrjak · Aug 26, 2011

I still think that if you haven't got anything better going on in your life, you should go to college because it's at least going to get you into the mindset of learning and meeting people, growing, etc... You've got to choose a major that will be applicable, of course...

If you are Bill Gates and you have a bigger project (Like starting Microsoft) which is taking all of your time, and you don't need college -- more power to you.

I think that a lot of kids though use guys like Bill Gates as an excuse to be lazy and not go to college, then 10 years later they wonder why they're still working as a waitress or receptionist while other people they went to high school with are their bosses, superiors, etc.

Cheers,

- Hakrjak

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