Ask Terry Questions Student loans — a rescue?

Student loans — a rescue?

By Terry Savage on June 19, 2013 | College Savings / Student Loans

My grand daughter, age 21, has student loans from ‘Direct Loans’ in the amt. of $11,000.
This loan was made 4 yrs. ago when she was laid off.
Being a single mom with a son , she decided to get further education.
Because of the stress of not working & found the school to be difficult she quit ( mental stress & needed antidepressants ) after only a period of less than 4 months & now has this great debt with interest rate of 6.89%.
She has been back to work for the past 2 yrs. but this loan just continues to grow so quickly.
I have decided to pay for the loan & have her agree to pay me back.
We have heard that you can get some loans reduced by paying cash in full.
This is so stressful for her & most difficult to manage the payments as the principal does not decrease.
Stressful for me as well with worry.
Could you give us some of your input as to what we can & should do ?
So very much appreciated !

SAVAGE SAYS: If this is a FEDERAL student loan, which Direct Loans are, then there is very little chance of getting the principal amount reduced. BUT, there are programs to help those with a hardship, including the?Income Based Repayment?Plan. ?So definitely contact the Direct Loan program. Here’s a link to that info:? Or you can go to

I think she should go this route before you dig into your own retirement savings, which you may need in the future — despite your generous thought. There is a lesson in here for her — despite all the stress — about the importance of understanding a financial commitment before she gets into it. And then sticking with the commitment to get the degree! So, “rescuing” her may not let her learn that lesson!? You can always be a “backstop” for her in case of need, but she really should be making some small payments on her loan through this program —



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