Julius,
I know exactly what you mean. The reason I know exactly what you mean is that, not too long ago, I was 28 years old with two degrees and over $50,000 in debt. I'm now 33 and, as of this February, I am debt-free, except for a mortgage. I don't say this to brag, I say this because I want to let you know that it is possible to dig yourself out of the hole you now find yourself in. The good news is that you can do it in five years or less. The bad news is that you're going to have to make some sacrifices, but it can be done.
When I graduated in 2000 with my second degree, I remember feeling just like you described in your letter. I would log onto my internet banking account and look at the $30,000 Canada Student Loan, $13,000 Ontario Student Loan, $5,000 maxed-out credit line, and over $4,000 in credit card debt I had managed to rack up during the decade of the 1990s. I remember thinking that, even with a decent starting salary, I would still be paying back student debt at the age of 40. That thought made me quite depressed. I probably felt much the same way then that you do now.
I just want to share a few things with you that, I hope, you will apply yourself when you graduate. They really made the difference for me.
1. Swallow Your Pride
I know it's tough watching other people your age driving around in shiny new post-graduation cars and bragging about the houses they just bought, etc, but it is absolutely imparative to your financial future that you live as cheaply as possible and make debt-reduction your number-one priority. For me, that meant, among other things, living like a student well into my thirties. Instead of taking on a mortgage or renting an apartment for $800+ per month, I lived in a room in someone else's house for $350 per month, all inclusive. Heat, hydro, cable, internet, etc.. were all included, I just needed to buy my own food. That translated into a savings of about $500 per month. Yes, it can be tough living like that as you get older, particularly if you insist on pursuing a relationship while you pay your debts, but it's not as bad as you might think.
Also, do you really need a car and the maintenance, repair and insurance costs that come with it? If it's possible, do without the vehicle and take public transit, as I did (yes, I realize that may not be possible, but at least consider it).
If it helps, you should keep in mind that many of the people your age with the house and car are also upto their eyeballs in debt. The $250,000 house? Probably carries a $240,000 mortgage. The $45,000 sport utility? It's probably leased. Resist the temptation to finance the illusion of material wealth. If interest rates rise or they find themselves in need of emergency funds, these people are all screwed!
2. Watch your spending
Okay, this seems patronizingly obvious, but you're going to have to do without the expensive vacations and toys (plasma TVs, season ski resort tickets, etc, etc...) for awhile. These rewards will come in time though. As "old hippie" said, at 26 years old, you've got decades of life ahead of you, and taking just a few of those years to pay your debts will pay dividends in the near future. Even the small things, like trading a coffee maker and supermarket coffee for your daily Tim Hortons fix could save you hundreds each year. All the little things add up, sometimes to a shockingly-large monthly expenditure.
3. Be disciplined
You've got to find the strength to take all that money you're going to diligently save and apply it to your loans rather than spend it. As soon as the money is in your account, transfer it to an internet bank account like ING direct where you can't immediately get at it (unless you get an ATM card), or better yet, immediately transfer as much as you can to your student loans before you even have time to think about spending it. These payments go directly to your loan principal and will shave months off the total time you need to repay everything.
These suggestions might seem simple, but they are most certainly not simplistic! Start paying back your loans immediately after graduation (don't take "advantage" of the six month grace period, the interest is piling up during this time), and within a few months you'll start to see some real progress. Success breed success.
Yes, I agree that our student loan model needs a serious overhaul, but that's not going to change the fact that you've got debt that needs to be paid back. Don't let the shortsightedness of our politicians prevent you from paying your loans as fast as you can and getting on with your life. We can't all be blessed with supportive and wealthy parents, we just have to play the hand we're dealt as best we can. My boss' four kids were all put though university by their parents, and they have (or will soon) benefit from cash payouts for downpayments on houses, weddings, etc... But I can tell you that there is nothing more satisfying than doing something for yourself, by yourself. And I'll tell you something else, the life-experience you will pick up along the way will prepare you to deal with the curve-balls life will throw your way in the future, unlike my boss' kids, for example, who are all emotionally (and to a lesser extent, financially) dependent on their parents.
A journey of a thousand miles begins with a single step Julius, so hang in there and before you know it you'll be debt-free and rewarding yourself for a job well-done.
Good luck!