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In spite of the recently announced White House plan to limit student loan payments to 10% of a borrower’s monthly discretionary income, and forgiveness of any remaining debt after 20 years, millions of borrowers will never benefit from that action because they’re already in default.
While some of those people are the type who take pride in cheating “Big Brother,” most are struggling with circumstances they never expected. Until a few years ago, landing a lucrative job shortly after graduation seemed like a reasonable plan for repaying student loans.
But in today’s economy, landing a lucrative job can be a serious challenge. So borrowers who expected no problem in repaying their student loans are now faced with serious consequences because of the ever-changing debt collection laws.
Why Default Is Dangerous
1. The debt lasts forever.
There is no statue of limitations on defaulted student loans, so until yours is repaid you become ineligible for a VA, FHA or HUD loan. Plus, the government can garnish as much as 15% of your disposable income, as well as Social Security and disability benefits. They can even keep all the income tax refunds you might have counted on receiving from the IRS.
2. Private collectors may jump in.
Any new government relief programs won’t apply to private loans, the kind a student needs after all government funding sources have been tapped out. Banks are just as likely as the government to file a lawsuit against debtors, and may also assign your account to a collection agency — which will add extra fees to the balance already owed.
3. Getting credit becomes tougher.
When credit bureaus are notified of a default, they make it considerably harder to qualify for a credit card, car or home loan. According to a Harvard graduate who defaulted on his student loans, “Living with no credit actually means you have to become much better in terms of making a budget. You cannot screw up because you don’t really have a margin for error. And forget doing things like renting cars.”
4. Your loan gets more expensive.
Once you’ve defaulted on a loan, the lender can require that the entire balance be paid immediately. By that point, you can no longer negotiate for deferment or forbearance. So, obviously, the time to negotiate is BEFORE you have to miss a payment.
Your Time Frame
Defaulting on a student loan can happen fairly quickly after graduating, leaving school or switching your enrollment to less than half-time.
You can count on a six-month “grace” period before repayment must begin, but the first payment is due within 60 days from the end of your grace period. After that, if you go 270 days without making a monthly payment, or 330 days without making a less frequent payment, your loan is automatically in default.
Before that happens, talk to your lender about different options for repayment. Standard, graduated, extended, income-contingent and income-sensitive repayment plans all have different advantages, and it’s important to understand your rights regarding each choice.
Protecting Your Rights
If you find yourself harassed by debt collectors or faced with inaccurate information on your credit report, understanding your rights becomes even more important.
You have legal recourse if a collector has engaged in any kind of contact that’s not permitted by the Fair Debt Collection Practices Act. Not only can you make collection agencies stop contacting you, but you can also recover statutory damages up to $1,000 and any actual damages, as well as court costs.
Whenever you’re faced with problems relating to unreasonable lending practices, don’t hesitate to ask for assistance in understanding your rights.
Larry P. Smith & Associates, a Chicago Law Firm, focus on consumer rights protection. If you are having difficulties with bankruptcy, debt collection or consumer fraud, request a free case review with Larry P. Smith & Associates.
Of all things, I’ve been thinking of getting a coffee maker lately. As with everything, I’ve been thinking way too hard about it. Where I’m going to put it, if I should spend the money on it, if it’ll be worth it. I’ve been patronizing my former nemesis, Turkey Hill, quite often recently. Their hazelnut coffee with french vanilla creamer just so happens to be delicious (despite the fact that I normally drink my coffee black). What isn’t delicious is adding an extra 5-10 minutes in to my 3 minute commute to scratch and claw my way two blocks north first, make it to the cashier, and then two blocks back south (to avoid crazy crossing guards). I also kinda figured that a buck-five a day to put myself through such inconvenience might not be worth it.
So, what’s a guy to do? The same thing I did with just about everything else when I first started my climb out of debt – make a spreadsheet, silly! I figured prices for a few different coffees and teas, per cup (cup cup, not coffee cup), and came up with a few surprising (and not so surprising) results. All numbers are based on Folgers’ claim that 33.9oz of coffee makes 270 (weak ass) cups, and a nice, simple $20 coffee maker.
- Keurig will never be cheaper, ever - Regular Keurig 18 count cups are 66c each, and even 87c for the Starbucks brand ones. Compared to 53c gas station coffee, it doesn’t even matter that the cheapest maker you’ll find at WalMart for these things is still $80.
- Starbucks Italian coffee is still cheaper than green tea - Okay, that was a bit of a surprise. Granted, we’re talking 9.29c versus 9.9c per cup, but still – cheaper is cheaper.
- Damn, even cheap tea is expensive – And I don’t drink the cheap tea (not that I have anything against it). Lipton Bavarian Wild Berry Black Tea pyramids are the shit. Except for when the string breaks while you unravel it, in which case you’d best tie that back together and use it. I know I do.
How do you guys get your fix?
This took me 6 8 hours to put together.
It’s okay, I have tea!
Last year all this information was spread out over something like 4 posts. Since there are trees to be saved, I’m smashing it all together in one giant post! Herein we shall find the following:
- The money numbers
- The blog numbers
- The goal achievedness (yes it is)
- The goal settings
- The usual monthly goodness
The Money Numbers
- Debt service – $15,693.65 (vs $13,221.93 in 2010)
- Debt reduction - $14,732.27 (vs $12,311.65)
- Monthly debt service – $1,207.20 (vs $1,017.07)
- Spending money – $6,685.29 (vs $6,121.34), monthly average $557.1
- Total take home income – $25,950.95 (vs $21,295.79, a 21.86% increase!)
The Blog Numbers
- Subscribers – 215 (vs 160)
- Income – $3,230 (vs $1,350, up 139.3%)
- Expenses – $696 (vs $311.03, up 123.8%)
- Profit – $2,534 (vs $1,038.97, up 143.9%)
Those are purely non-search referrers. While I did get hit by Lifehacker a couple of times this year, they weren’t nearly as fruitful as in 2010. Ah well, I’m not complaining. Take those out and the traffic is probably up. The mad increase in profitability is all thanks to having someone else manage my advertising for me, but I’ve got a lot of work to do myself. It would’ve been a down year if it weren’t for that.
The Goal Achievedness
- Reduce debt 33% – The general idea here was that, with three and a half years left, I should shoot for a third to end up ahead of the game (when I was behind at the time). With my end of year payments, I bumped it up to 33.09%. Being barely over the line is no mistake, either, but it did come down to the last paycheck of the year.
- $3000 emergency fund - Bahahahahaha no. What I do have is a $666.52 emergency fund, as well as various other savings. Since I didn’t really expect to hit this goal, it doesn’t hurt too much. It had reached as high as $1,985 back in May, but apparently I decided it was better to spend that money at the time. Go team.
- Quit smoking – Smoke free since August 7th. There are so many smells I wish I didn’t smell.
- Run a 7 minute mile – I thought this was pretty conservative, since I did a 6:30 in high school without having a goal in mind. I broke 8 minutes in July and haven’t run since. As I definitely remember that cold-weather running sucks balls, I just couldn’t bring myself to attempt a last minute effort.
- Quit drinking (excessively) - Haven’t been keeping beer in the house for quite some time now. Got a 12 pack a month or so ago… that was uneventful. Money saved? Tons. All the more for hookers and blow.
- Junk out - While I did have one pretty successful weekend wherein I managed to fill a truck and a trailer, things have pretty much flatlined since then. I’ve been trying to keep an eye on incoming stuff, and trashing stuff as it annoys me (Regifting Robin is getting tossed pretty soon), there hasn’t been much renewed effort. Neither pass nor fail.
- Conversational Japanese - This was probably a bit unrealistic, but I did both slack quite a bit and had less than the full year to work on it. It’s not a failure, though, because I did make a heck of a lot of progress. I’ve got a pretty decent handle on the grammar, it’s just a lack of vocabulary that does me in now. Just last night, though, I watched Summer Wars for the first time in about 6 months. I’ve seen this movie at least 10 times, and it just blew me away at how much of it I suddenly understood. Still not enough to know what’s going on.
The Goal Settings
- Reduce debt 50% – With 2.33 years left to go before my debt free goal date of May 2014, it just kinda makes sense to go for a clean half. This is actually just a bit more than what I paid off in 2011, at a smidge under 15k. Sensing that a flatline goal might be a pussy move, I’m also looking at 60%, which is just under 18k.
- $3,000 emergency fund - I still think this is a good number for me, and should be easy as pie come May. After that it’ll just be a matter of not blowing it, or needing to use it. Not so pie.
- Run a 6:30 mile - When facing failure, fail harder. I should be able to do this, dammit.
- Junk out - Non-quantifiable goals suck. This is one of them. I’ll have to come up with something. A system, a schedule, something.
- $10,000 side hustle income – This is the big one. Going from $2,500 to 10k sounds unrealistic… to some. I see no reason why I shouldn’t be able to do it, though. Ideas, I’ve got them. Honestly, though, there’s no way I’m ever going to make it in this business if I can’t hit this goal. Again, this is the big one.
- Half hour daily Japanese – Since a language goal is terribly difficult to quantify, I figure it’s a hell of a lot easier to quantify the effort instead. This is going to be actual study time – watching a movie doesn’t count.
The Usual Monthly Goodness
From December 1 to January 1, my net worth increased an average of $64.86 per day, or $2,010.73 overall, to -$27,483.24. This is a 7.32% increase, and results in a projected zero net worth on 1/25/2014. Meanwhile, my magic number went down from $1,126.50 to $1,104.84.
Oh, and before I forget, one last look at the 2011 goal chart before I clear the slate!
Wait, what’s that? Right in the middle there… Capital One paid off… December 31st!? Yeeeaaaaahhhhh dog! Debt eliminated, $200 monthly payment eliminated, and with that, my minimum monthly debt payment is down to an amazing $215!!! Yes, this is going to be an excellent year.
Ijou? Iie, choudo hajimete!
Today is December 28th. Including today, there are four more days left in 2011. You haven’t been living without a calendar, have you?
For many goals, it’s far too late to do anything now (how inspiring!), but for a few, now is the time to triple check and make sure you’re not missing the boat by a few inches. I nearly slipped myself tonight after work – I’ve been getting thoroughly sick of my current set of speakers that I use to jam out at work, decided I’d had enough, and had every intention of running out to WalMart and dropping $100 on some new ones. It dawned on me then that achievement or failure could hinge on that hundred bucks.
Looking at the preliminary numbers, I just might be right! Not only do I know to keep my wallet closed for the next few days, I know exactly what needs to be done to hit certain numbers. Depending on Friday’s paycheck for finality only slightly hampers my efforts.
And then, there are a few goals that I’ll just have to save for next year.
You. Go check your goals! Time’s a wastin’ and it’s down to the wire.