A public-health caseworker is worried about how she'll manage the $1,000 payments she must start making on school loans next year, but she also wants to learn to take charge of her finances.



Student loans were once a lifeline for Sue Ferguson and her family.

With her husband unable to work because of a medical condition, loans covered not only her college tuition, but also the family’s living expenses and child care for her daughter while Ferguson earned a master’s degree in education.

Fast-forward 17 years and those loans have ballooned into a $140,000 albatross for Ferguson, a public-health caseworker for Snohomish County’s Kids Get Care program. Through various loan consolidations and programs that give more time to borrowers who are facing economic hardship, Ferguson has yet to make a payment.

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Now 52 and closer to retirement age than student age, Ferguson, who is no longer married, faces monthly loan payments of $1,000, which she must begin making next year.

“I don’t see how I’ll be able to afford it, nor will I ever be able to pay it off before I die,” says Ferguson, who makes $48,000 per year.

At work, Ferguson helps low-income families get medical and dental insurance for their kids and makes sure they keep up with routine visits and immunizations. Typical days take Ferguson to schools, child-care centers and homeless shelters. Ferguson counsels her clients to keep their records organized and to follow through with assistance that may be available to them. Now, she says, she needs to take her own advice.

“I want to be responsible. I want to pay [the loans] back,” she says. “It’s time to face the music.”

Money matters often took a back seat for Ferguson.

“I grew up in a family where we didn’t have money or things,” she said. “My marriage was the same way, we never had two cents to rub together.”

A bankruptcy filing two years ago, after her divorce, relieved the burden of medical and credit-card debt that had piled up while Ferguson supported her family with various jobs at nonprofit agencies. Student loans are rarely discharged with bankruptcy, however, unless the borrower is unable to work.

Post-bankruptcy, Ferguson pays her credit-card balance off every month and contributes $200 each month in a retirement plan at work, something she never had the opportunity to do in the past, she says.

Though her housing expenses are low — she pays $260 in rent plus a portion of the utilities for the mobile home in Bothell that she shares with her partner — she says she still feels like she overspends each month.

“I want to learn how to manage money without feeling choked,” Ferguson says. “And I want to retire before I’m 85. Is that even remotely possible?”

Helping her figure that out is Ethan Broga, a certified financial planner with Empirical Wealth Management in Seattle and a member of the Financial Planning Association, Puget Sound Chapter.

“Obviously, she’s in a bit of a tough spot with the student loans,” Broga says.

“But she does have room in her budget to pay this size loan down.”

How so? Before meeting with Broga, Ferguson had learned about a new program available to public-service workers that forgives student-loan debt after 10 years of payments.

The Loan Forgiveness for Public Service Employees Program was established by the College Cost Reduction and Access Act of 2007 and adjusts payments to match the borrower’s income.

Ferguson had already consolidated her loans with the U.S. Department of Education’s Direct Loan Program, a requirement to qualify.

Broga — who is no stranger to Ferguson’s plight, having accumulated $45,000 in student loans by the time he graduated from college — helped determine Ferguson’s eligibility and worked out what her payments would be if she were accepted.

“Since she’s working for a nonprofit, the Direct Loan Program will reduce the monthly payment to fit her budget,” Broga says. “And after 10 years, the balance will be forgiven.”

By Broga’s calculations, Ferguson’s payment would be $625 per month.

After 10 years of payments, Ferguson would have paid back $75,000. The remaining balance — which would total about $150,000 including interest (the rate is locked in at 8.25 percent) — would be wiped out, providing she continues to work for a nonprofit or in public health.

By then, Ferguson will be 63 and four years away from retirement. Social Security and the 403(b) retirement account Ferguson has started should be sufficient to cover the $2,000 per month they figure she’ll need, Broga said.

In the meantime, Broga and Ferguson worked out a budget based on her net monthly pay of $2,725.

After her monthly expenses, Broga determined Ferguson will have roughly $990 left each month, enough to cover the student-loan payment and increase her retirement savings from $200 to $250 month.

Broga recommends Ferguson use the rest to build up an emergency fund totaling six months of living expenses.

“Sticking close to a budget is the best thing she can do,” Broga says, adding that free online tools, such as www.mint.com, are available to help keep track of spending.

Broga showed Ferguson how to use mint.com during their meeting. Ferguson was impressed enough that within hours of getting a copy of her financial plan from Broga, she was logging on and learning.

“I thought I was spending $200 a month on food,” she says. “But I also eat out, so I’m finding out it’s more than I thought.”

She’s also completed the application process for the loan-forgiveness program and will know in a few weeks if she’s been accepted. And for now, her financial phobia is in check.

“I thought maybe [the financial planner] would say, ‘There’s nothing we can do,’ ” she says.

“In reality, I am getting somewhere. I’m further along than I thought I was.”