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Ask Dave

Ridiculous Decisions Have Consequences

Tyler discovered his wife over $100,000 in student loans. Tyler has $20,000 in student loans. Dave says they're going to have to cut their lifestyle to nearly nothing to pay it off.

QUESTION: Tyler in Baltimore graduated in May, got married in July, and he discovered his wife has more than $100,000 in student loan debt. Tyler has $20,000 in student loans. They’re making $70,000 a year, and his wife is a social worker. Dave says they’re going to have to cut their lifestyle to nearly nothing to pay this debt off.

ANSWER: If you’re only figuring out a way to pay $16,000 off, you’re going to have to cut your lifestyle further than that. It’s going to have to be what you have to do and what you don’t have to do. You’re not going to see the inside of a restaurant unless you’re working there. You both need to look for extra income. The truth is you’re not going to live a very luxurious newlywed life, because you have a huge freaking mess here. The patient is about to die. The last thing we worry about is whether he gets a doughnut. This is a financial disaster. You guys are going to have to treat it like the house is on fire.

You guys are going to have to sit down together and cut your lifestyle further, because you need to pay off more than $16,000 a year out of $70,000—a lot more. Before you buy a home, you need to have this stuff paid off and you need to have an emergency fund saved. Babies come whenever you want babies to come. I don’t argue about babies. I think they’re fine and not going to make you or break you most of the time, assuming you get health insurance. Buying a home is on hold. Buying anything is on hold because of ridiculous decisions made in the past. Those ridiculous decisions have a consequence. Truthfully, spending $100,000 to get a degree to be a $30,000-a-year social worker qualifies on the stupid scale. The point is, you guys are reaping what’s sown, and there’s not an easy way to do this. The more income you can generate and the more you crunch your lifestyle, the faster these numbers go down.

I’m not going to pay first on her loans and then on yours. It’s “ours” now. We are married. List all of your debts smallest to largest. Knock the smallest ones out first as fast as you possibly can. You have to maintain the minimums on the others. There’s no way around that. Scorched earth on your lifestyle and do anything you can to get your income up. Let’s get an eBay hobby where we can make some money. Be creative. Be fun. You can be self-employed or you can deliver pizzas. An extra $10,000 or $20,000 coming in all thrown at these student loans gets you in a home faster. I don’t want you wandering out of this thing for seven years. I want you to talk about cleaning it up in three years, which is about $35,000 a year—double what you’ve budgeted. That’s why I’m pushing so hard on you in this call.