Dear Penny: I’m in so much debt my teenage son is afraid of student loans

First evaluate financial aid options for your son, the advice columnist says, then seek counseling on handling personal debt.
Published February 4

Dear Penny,

I am in a horrible spiral. We first got into debt when my husband and I agreed I should stay home to care for our first baby. Without my income — and with our reckless spending habits — we accumulated massive amounts of credit card debt.

Within five years, we had three children. My husband had student loan debt, and we took out payday loans to help cover everyday expenses. With day care costs so high, it made no sense for me to work.

Eventually, I realized I had to do something to help with this burden, so I got a Pell Grant to attend college. Stupidly, I took out the maximum amount of student loans to help with day-to-day living expenses.

I figured I would make enough with my degree to pay it all back and get us out of the deep, deep hole we were in. I was wrong. I defaulted on my student loans and have not been able to pay any debts. We struggle to pay the payday loans each month, our rent is always late, our kids do without things they need — even lunch money — and we struggle to pay for gas and groceries.

On top of all that, my husband had a heart attack last year, so we have taken on astronomical medical debt.

Our oldest son is graduating high school this year, and he’s so traumatized by the struggle he sees us go through that he almost didn’t apply to colleges. He’s a brilliant student, but he’s terrified of going into debt. He knows we can’t help him with the costs, and with our “middle-class” income, he won’t qualify for financial aid.

My heart is broken over this. I have been thinking about quitting teaching to get the retirement savings I’ve built up. I don’t know what else to do to make a dent in this mess.

I don’t even know where to start. Help!

-J.

Dear J.,

Your debt has consumed you. You probably thought you hit your lowest financial point years ago, when you were a new mom; then you probably thought you were at the bottom again when you defaulted on your student loans. And now, here you are with the added burdens of medical debt and your son’s misconceptions about how investing in college could derail his future.

There’s a lot you can’t change right now. But one area where you can make a major change right away is in how you and your son discuss his options for higher education.

Your family’s income is not the sole determining factor for how much financial aid your son is eligible to receive. The size of your family, for instance, will also be considered. Applying for federal student aid is a must-do if your son wants to pursue college, as it’s the first step toward figuring out what sort of grants, loans and work-study programs will be available to help him cover the costs.

Once he receives financial aid offers, he can truly evaluate the affordability of school. He may have to start at community college or another lower-cost option, but he shouldn’t count out college solely because of your family’s financial struggles.

Next, it’s time for you to get help sorting out the options for your own finances. Calling for assistance from an impartial third party can help you make sense of your situation instead of spinning your wheels and feeling desperate. A debt counselor in your area can review your credit report and provide free educational resources that can help. They can also help you enroll in a debt management plan that will make your debt easier to manage.

In extreme cases, a debt counselor may recommend that you consider filing for bankruptcy, which can discharge some of your debt. There’s a lot of shame around the idea of doing this, but it could be the lifeline you need to find stability for your family.

And that may be the hardest part of taking your next financial step: letting go of the shame. More people than you can possibly imagine have struggled to gain financial stability, let alone success. I won’t be glib and say you’re in good company. But you at least have company.

You may be surprised at how understanding your peers are as you seek help and start to work your way out of debt.

Worried your financial stress is impacting your family? Write to Dear Penny at https://www.thepennyhoarder.com/dear-penny/

Lisa Rowan is a personal finance expert and senior writer at the Penny Hoarder, and the voice behind Dear Penny. For more practical money tips, visit www.thepennyhoarder.com.

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