The Mastons may need to seek bankruptcy protection to keep creditors at bay no matter what they do, Stark said, and they will need ongoing legal and tax advice to guide them through the process.
The couple don't fare much better with their own home, which they bought in 2005 and has fallen in value by $60,000 in the last year or so to about $520,000.
Though that doesn't seem like much of a drop compared to ravaged values elsewhere, the Mastons have two loans totaling $578,000 on the home. The first carries a relatively low 5.75% interest rate, but the second mortgage of $163,000 has a sticker-shocking 9% rate.
The second loan was taken out mainly as the down payment so the Mastons could avoid the added cost of private mortgage insurance, which lenders tack on to a home loan when the down payment is less than 20% of the purchase price.
Loan modifications and government aid
Stark urged the couple to go to the lender of the second and try to renegotiate terms, taking advantage of any available government relief.
They should try to obtain a fixed-rate loan at 6%, he said. That could reduce their monthly payment from $1,300 to $975 a month, he said.
"The good thing is that you are not alone," Stark told them. "The government recognizes the problem. And the banks and lending institutions understand the problem. And you're not 60 years old with all your eggs in one basket. You have your whole lives to move on."
One advantage: The Mastons' government jobs come with benefits that include adequate life insurance, some disability insurance and pensions that should be stable, he said.
Stark estimates that, in 12 years, the full amount of three college tuitions at the UC and Cal State systems would cost the Maston family nearly $600,000 and $300,000 respectively -- impossible amounts on their current budget.
He suggested they send the two girls, Ixchel and Nayeli, and the boy, Usuhe, to junior colleges for two years before transferring them to four-year institutions to cut those costs in half. He also said they should start talking about college with their children soon.
"The biggest mistake I see parents make is when they start talking to their kids about college the year before they are supposed to go," Stark said. "Bottom line here is to get your children thinking in a certain way now."
Stark said the couple should pay off their $8,000 in credit card debt before focusing on Esther's student loan because the credit card debt carries an 11% interest rate while the student loan has an 8% rate.
