Will debt ceiling deal lead more people to seek help with debt?
Will the government’s agreement on the debt ceiling result in more people struggling with student loan debt? While the deal keeps the Pell Grant program intact, loans subsidized by the government will take a hit in July 2012. That could result in students struggling to keep up with interest, ratcheting up their total debt.
Currently, subsidized loans don’t require payments on interest until after students leave school. But the government’s debt ceiling deal would require graduate students to begin paying interest on student loans while they are still in school. If they don’t make payments on interest it would accumulate, which could lead to more people struggling to afford student loan payments after graduating.
Get help with debt
There are some options for dealing with mounting student loan debt. Student loan debt consolidation could allow you to combine several loans into one monthly payment and interest rate. Federal student loans should be consolidated separately from private loans. When you consolidate debt that could you to avoid defaulting on loans and allow you to maintain your credit.
Debt counseling combined with a debt reduction plan also could help you manage student loans. A debt counseling firm can help you go through all your debts and set up a budget to handle everything. Look for a reputable debt counselor who gives you detailed information about all fees, policies and procedures. Never pay upfront fees before receiving services.
Bankruptcy won’t help
Some consumers mistakenly believe that if they file for bankruptcy that they’re student loan woes will end. Unfortunately, it is highly unlikely that your student loans would be discharged if you were to file for bankruptcy. Only if you were able to prove that student loans were an “undue hardship” on your financially would you qualify to have them discharged. However, the loans could be discharged if you were disabled.
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Loading ...Debt relief: managing your own “debt ceiling”
Here are some debt management tips helpful for controlling credit card debt.
Debt management 101: Don’t increase credit limits
When you’re short of cash or have unexpected expenses, opening another credit card may seem like a good option. Instead, be realistic about how digging deeper into debt helps with your goal of effectively managing debt. Don’t fall for offers of deep discounts for opening a new credit card. Unlike the federal government, consumers can damage their credit by opening new accounts and maxing out credit cards.
Reducing finance charges: Can balance transfers help?
Finance charges, or the cost of using credit, are calculated as an annual percentage (APR) of the amount of debt you owe. Your credit card statements show your current APR for each monthly billing period. Take a deep breath and check out the APR for each of your credit cards. Variable interest rates, penalty fees, and card usage cause the APR to change.
Credit card companies promote transferring balances to their card in exchange for a low or no interest rate introductory period. Read the fine print; there is usually a 3 to 5 percent transfer fee tacked on to each transfer. This may be worthwhile under the following conditions:
You can transfer balances with double-digit APRs and pay them off within the introductory period. Failure to pay them off during the introductory period means that balances remaining after the introductory period expires will accrue interest at a new and usually much higher rate.
Controlling spending/card usage: If you practice retail therapy, or buy big ticket items that cannot be paid off in one billing cycle, please think twice about balance transfers, especially if you’re opening a new credit card account.
Consult a financial advisor or credit counseling and debt consolidation program for help with reducing and managing credit card debt.
(No Ratings Yet) Loading ...Ultimate debt relief: Understanding the psychology of debt
You’ve dug yourself into a hole with credit card debt and wonder what’s next. Digging out of debt is important, but first you may have to dig deeper for understanding psychological factors leading to credit card debt.
Devil in the details: discover what you’re buying, where and why you’re using credit
Financial anthropologist and money coach Denise Hughes identifies factors contributing to problems involving credit card debt:
- Having a different “money-style” than your spouse or partner: Using credit cards for funding purchases you want to keep secret, or revenge shopping when you’ve had a domestic spat are examples of how conflicts over money can create credit card debt.
- Compulsive shopping: Rewarding yourself with a plastic-funded shopping spree after a bad day at work may seem therapeutic, but it can lead to family problems, divorce and bankruptcy.
- Entitlement and deserving: Do you treat yourself because you “deserve it”? Do you over-spend when you’re angry, depressed or lonely?
- Making purchases using revolving credit: Buying things that you cannot pay for within one billing cycle causes credit card debt to increase and can lead to penalty fees and lower credit scores.
Using credit cards in place of meeting deep-seated psychological needs such as feeling loved and appreciated, having fun, having an influence over your own life, and enjoying personal freedom can lead to financial problems.
Attempting to replace vital emotional needs with over-spending using credit cards suggests that you’re attempting to fill a vacancy in your life by buying things. Consulting with a financial advisor or consumer debt counseling service can help with improving your finances and quality of life.
(No Ratings Yet) Loading ...Poll: Kids worry about having enough money, too much debt
A U.K. study found that two thirds of kids 12 to 16 are worried about not having enough money in the future. The poll conducted by the Personal Finance Education Group, a charity focused on financial education, surveyed 1,000 kids between the ages of 12 to 16.
Will they have too much credit card debt?
Among the survey’s findings, 62 percent are worried about not having enough money and 30 percent worry about being in debt in the future. The poll also found that 77 percent of kids want to attend a university in the future, but half of them worried about getting a job later in life even if they get a degree.
Most of the kids polled (95 percent) said is important to learn to manage their money. Topping the list of the things they are most interested in learning about are: household bills, budgeting, saving, and the cost of having their own house of apartment, among other things.
Parents can teach children
Kids want to learn about handling money, avoiding credit card debt and other financial information. Much of what they will learn about handling money is likely to come from watching their parents. So if you are a parent and have a lot of credit card debt and other bills, it’s a good idea to start making some changes in your own financial behavior. Getting help with debt can allow you to form better financial habits that can be passed on to your kids.
If you aren’t sure where to start, it may be wise to find a reputable debt counseling firm. Finding debt solutions now can help you avoid even bigger problems down the line and put the steps in place for your kids to have a brighter financial future. As you work through your financial difficulties be open with your kids about your efforts to manage money more wisely.
(No Ratings Yet) Loading ...4 simple ways to save while in debt
It may feel like you’ll never get your credit card debt paid off and begin to build a savings. However, adjusting some of your spending habits and reviewing your bill payments could help you escape the debt trap for good.
- Adjust your attitude. Even if you have a lot of credit card debt it’s not the end of the world. Many people have found themselves harassed by creditors and confronting enormous mounds of debt but have managed to turn their situation around. By changing your behaviors and thoughts about money, you, too, can begin digging out of debt.
- Put together a debt reduction plan. It’s almost impossible to pay down a lot of credit card debt and other bills without a plan. The first step in a debt reduction plan should be to total up all the debt so you have a realistic idea of where you’re at. After that you’ll need to set up a budget that accounts for all household income and expenses. If you aren’t sure how to set up a budget, a debt counseling firm may be able to help. Cut out or reduce any expenses that are not necessities.
- Prioritize your bills. There are certain bills that must be paid each month, such as housing costs, utilities and food. Consider putting those bills on an automatic bill payment plan to make sure they arrive on time each month. On-time payments will keep you from accumulating a lot of late fees or having interest rates jump, which can potentially save you hundreds–or even thousands–of dollars each year.
- Build a nest egg. If you find that tweaking your budget is freeing up more of your income, use some of it to build an emergency savings. Putting away $25 out of every paycheck is better than not saving anything. Also continue to make the payments on your credit cards and other bills, and divert any extra cash toward paying off one of your debts. After you get to a zero balance, roll whatever you were paying each month toward another debt. Before you know it you’ll be debt free and have a nice balance in a savings account.
(No Ratings Yet) Loading ...Want a student loan? Where’s your budget?
Student loan defaults have become such a concern that one community college is now requiring students to complete personal budget worksheets in order to receive loans. Tidewater Community College, based in Norfolk, Va., wants students to outline a realistic picture of their financial situation before and after graduation, including a repayment plan for student loans, according to Inside Higher Ed.
Making students accountable
The move goes beyond requirements set forth by the U.S. Department of Education for receiving federal loans. The school hopes making students more accountable will help them make more responsible decisions about borrowing money for education expenses. Deborah DiCroce, president of Tidewater Community College, told Inside Higher Ed that student loans are “not a handout.” She went on to say:
It’s not something that goes away when the college experience is completed or not completed. There’s a commitment to repay a loan that has as much weight to it as any other kind of borrowing one might do. My concern, as we are ramping up our financial aid program, is keeping a close eye on our default rates, as one of our measures of accountability. It just became clear that we needed to take a step beyond what the feds require. Where is our responsibility to educate a borrower on this type of investment?
Looking for debt solutions
Many students need debt help because of high student loan balances they can’t pay back. Not only are many recent graduates having a tough time finding jobs that allow them to afford student loan payments, but they are also carrying high levels of credit card debt.
Tidewater Community College has the right idea with having students put together a financial plan that involves paying back any money borrowed. More students need to be educated about the consequences of taking on student loan debt and combining it with high-interest credit card debt, auto loans, etc.
(No Ratings Yet) Loading ...Get debt help to avoid IRS wage garnishment
Don’t expect the government to let you get away with not paying your tax bill. As many high-profile cases involving celebrities such as Wesley Snipes and Al Pacino and have shown, the Internal Revenue Service (IRS) expects to get paid no matter what your sob story may be. If you don’t set up some type of payment plan with Uncle Sam, don’t be surprised if the situation escalates into an IRS wage garnishment.
What is wage garnishment?
The government can legally deduct a portion of your wages–up to 25 percent–to pay back what you owe. A wage garnishment usually results after repeated warnings and letters about unpaid tax debt. The IRS would rather work with you to set up some other type of agreement for paying your tax bill, so do whatever you can to avoid having a levy placed on your paychecks.
The biggest problem with wage garnishment is that you are likely to struggle even more to pay household bills and other expenses. If you are already having a tough time financially, you may end up in the position of having to take on a second job to boost your income.
Get help with debt
If things have really spiraled out of control and you have a big tax bill and other financial obligations hanging over your head, it’s probably time to get help with debt. A debt counseling firm may be able to help put together a debt reduction plan to get you moving in the right direction. A debt counselor may also be able to help you navigate the IRS system for setting up some type of payment plan.
If you have already received a wage garnishment, consider finding a knowledgeable tax attorney. The attorney may be able to help you get a wage garnishment released or set up some type of installment agreement to pay back what you owe.
(No Ratings Yet) Loading ...Should you consider debt settlement to save money?
Yes, some creditors may be willing agree to a debt settlement, but doing so isn’t always the right strategy for everyone. Make sure you weigh all the pros and cons to get the best results for your situation.
DIY vs. debt settlement programs
Most people consider signing up for a debt settlement program because they aren’t sure where to begin with wiping out credit card debt and other bills. Using one of these services usually requires you to make payments into an account with the firm for a period of two to three years, and the funds that accumulate are used to pay off debt.
While some debt settlement programs do exactly what they advertise, there are many accounts of consumers being duped and left with unpaid bills. Research any debt settlement program you are considering to make sure it is reputable and has a good track record.
Savvy consumers should be able to skip the middleman–a debt counseling firm–and negotiate a debt settlement directly with creditors. It may take several attempts to reach the individual who is authorized to approve a deal, so it pays to be persistent. Also, don’t expect to get a debt settlement unless you are at least two months behind on your payments.
Pros and cons for debt settlement
The upside to settling debt is that you can get a portion of your credit card debt wiped out. In some situations creditors may be willing to waive up to 50 percent or more of your debt. Generally, you’ll need to offer up some sort of lump sum payment, but there may be situations where a payment plan might be set up. But paying off a smaller percentage of debt can lessen the amount of interest paid out over time.
The downside to striking a deal is that you may still owe taxes on the forgiven debt. If you owe a significant amount of debt, talk with a tax adviser to get an idea of how big the tax hit may be.
(No Ratings Yet) Loading ...Should you cosign for a student loan for Junior?
Many young people are unable to get private student loans without a cosigner. Their parents may step in to help them get the loans the need, but end up putting their own financial security at risk. Here are some things you should think about when weighing the pros and cons of co-signing for student loans.
Federal vs. private student loans
Your kid should always apply for federal student loans before turning to private loans. Federal loans such as the Perkins or Stafford are not based on credit scores, so there is no credit check. Students also do not need a cosigner to qualify for federal aid. However, private student loans do require a credit check, and your student probably won’t qualify without a cosigner. Depending on the lender the borrower may be required to get a cosigner even with a healthy income and credit score.
Parents’ financial profile
As a parent you should ask some questions about your financial situation–now and in the future. Use the following questions as a starting point:
- Do you have a lot of credit card debt and other bills?
- Are you having trouble making your mortgage payments?
- Are you worried about your future job security?
- Have you experienced a recent drop in income?
- Is it difficult to make your income stretch between paychecks?
- Have you saved a substantial amount for retirement?
Do you need debt help?
If you are already struggling to handle all your household expenses, co-signing for a student loan is probably not a good idea–if you can even qualify. If Junior defaults on a loan, as the cosigner you would be responsible for paying it back. Many recent graduates are coming out of school with no job prospects in sight, and that could happen to your kid as well. So think about whether heaping a student loan payment on top of all your other obligations would push you to a financial breaking point. If your finances are too out of control, it may be time to get help with debt from a debt counseling firm.
(No Ratings Yet) Loading ...You and the government need to clean up credit
The U.S. government received a wake up call this week when Standard & Poor’s revised its credit rating outlook to negative from stable and affirmed its ‘AAA/A-1+’ sovereign credit ratings on the United States.
“Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable,” S&P said in a statement.
More pressure to cut debt
The S&P report steps up the pressure on the government to get the federal deficit and debt under control before it loses its AAA rating. It also is a reminder that many Americans need to step up efforts to get their own debt under control.
Check your credit report to see what needs to be done and then consider the following things that can help get your credit in order.
- Debt counseling: Don’t think you have to go it alone when trying to wipe out credit card debt. Find a reputable debt counseling firm that can help put together a plan for tackling your bills. Look for an agency that helps you learn to budget and offers educational programs aimed at improving overall money management.
- Credit card debt settlement: Being behind on credit card payments by a few months may actually work in your favor for negotiating a debt settlement. Contact your creditors to see if you can negotiate a lower payoff. It may take several attempts to reach the right person who can set up a debt settlement, but it’s worth the effort. In some cases consumers have been able to settle credit card debt for less than half of what was actually owed.
- Credit consolidation: Consolidating your bills may allow you to get a lower monthly payment. While lower payments can help while you’re trying to repair credit, it’s a good idea to continue paying as much as possible toward debt if you can afford it. Finally, debt consolidation only works if you avoid running up more debt.
(No Ratings Yet) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
We rely on a large network of financial experts and leading authors to write the content for the DebtHelp.com Blog.
Get help with debt before seeking an auto loan
Keeping your personal "debt ceiling" from crashing down
Will debt ceiling deal lead more people to seek help with debt?
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.
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