A North Carolina mother of three called into a financial advice radio program this week. Lisa, who stays home with her children, reported $90,000 in student loan debt. Her husband earns approximately $5,500 monthly from a new business.
She detailed their obligations to host Dave Ramsey. The couple holds two car loans amounting to $51,000. Her student loans accrue $300 in interest each month.
"You’ve got an untenable situation, the math you’re giving me is scaring me to death," Ramsey responded on air. "These cars are both just insanity. You guys have cars you absolutely cannot afford, you’re going to go bankrupt."
He stated their low income and high debt raised serious concerns. Ramsey advised selling both vehicles immediately.
Lisa explained she is finishing a graduate counseling degree and plans to take on more debt for her final year. She cannot work yet due to a young baby.
Ramsey warned that avoiding bankruptcy requires selling the cars and increasing household income to start repaying debts. "It’s not an interest rate problem, it’s a cash problem," he said.
Further discussion revealed their monthly house payment is $1,100, with car payments near $800. Ramsey called their position a corner requiring radical change.
"You have $140,000 in debt and $50,000 of that is on cars," Ramsey told her. "There’s just no way, Lisa, this has to change... the math is just screaming off the page here."
Lisa asked about refinancing her student loans. Ramsey said her rate was already at market level and advised focusing on income instead.
"It’s doable when you get rid of $50,000 worth of cars," he concluded. "It starts to turn around then."