How to deal with the debt collector: Tips for managing your student loan

Student loans are easier to get than credit cards....the only requirement is that you are in school. Below are tips to keep in mind when you are borrowing the easy money.

Plan to pay back $50 per month for every $5000 you borrow. For example, $25,000 in student loans is a $250 per month bill for 10 years.

Don't use student loan money to pay off credit cards. Credit cards are unsecured debt and may be discharged or decreased in bankruptcy. Not true for student loans.

Consider how much debt you will have if you graduate in 4 years. It is not uncommon for students to attend a $20,000 per year school and wake up with over $100,000 in student loan debt. That job for $70,000 may not come your first year out of college. Or second. Or third.

Consider attending a state school, attending community college for two years, or working for a company that will pay for school will keep the debt to a comfortable level.

An excellent resource to look at your legal options:

I can't pay my student loan

The amount of money students borrow for an education is astounding. Not being able to find a job, not reading the terms and conditions of the loan, and not realizing how much a monthly payment will be for 10-20 years are, and the overall economy are just a few of the challenges. The problem is compounded when the student withdraws from school and if there is an endorser on the loan. If you are in trouble, you must act quickly. Some steps to take are:

1. Notify the endorser immediately if you have one and ask them to help. They are reported to the credit agencies on a regular basis---this is based on if YOU keep the loan current.

2. Ask if you can get the payments lowered while you are going through a hard time. Most student loans offer a graduated repayment schedule. Remember that interest accrues daily on the loans so your monthly payments may increase a few dollars.

3. Ask for a forbearance only if you absolutely cannot make any payments on the loan. The amount of forbearance time is usually limited over the life of the loan so use the time wisely. Your life will change dramatically over 10-20 years.

4. Not paying the loan is not an option. If you want a job that requires a decent credit score, blaming the loan organization may not be your best move. Work with them and get the matter resolved. You are smart enough to get an education, just look at it as a matter of conflict resolution.

Call process step by step

1. The collector will tell you the current balance, amount due, amount delinquent and usually the number of days in delinquency. Then he or she will ask, "Can your bring it current today?" If yes, then given the how you will pay, when you will pay and the amount you will pay. ALWAYS ASK ABOUT THE DUE DATE. If paying the balance in full, ask about waiving some finance charges and late fees. If paying the amount due, always be prepared to do a check over the phone if they are willing to waive the fee and remove a late fee, over the limit fee or finance charge.

2. No, you can't bring the account current, why? If you are unemployed, are you receiving unemployment insurance or did you receive a severance package? How are you paying the rest of your bills? Look at cutting your expenses. Turn off cable and satellite television. Try purchasing food from the food bank. Change your cell phone plan to prepaid and use it for emergencies only. I still cannot understand why people say they cannot find a job when fast food places are always hiring-and they pay more than unemployment. House behind, ask the mortgage company for a deferment or programs to pay the interest or principle only on the home.

3.

I can't pay the minimum payment on my credit cards and the calls are starting

The call always will start with, "this is an attempt to collect a debt..." Job loss, illness, unexpected financial difficulties and just plain old life will get in the way of the best plans to repay credit card debt. Ignoring the phone calls, cursing people out, hanging up on the collector, telling them you have moved, and anything else other than paying the bill will not help your situation or move the collector. Bottom line, you spent the money. Bottom line, you said you would agree to paying back at the interest rate THEY set anytime you use the card and sign your name. This blog will help you deal with creditors in the most efficient manor and give you a little help with dealing with the "rude" collector in the process.

When the collector calls in a nutshell

Answer the phone
Ask about plans to bring you current (especially if you are behind over 90 days)
Ask about programs that will waive late fees, over the limit fees, reduce the interest
Ask about reaging the account (making 3 minimum payments on or before the due date) to bring the account current
Ask about the oldest minimun payment and be willing to pay it if you can
Be willing to do a check over the phone if they will waive fees and not charge a check fee
Be willing to permanently close the account if they can reduce the interest rate to zero and stop all fees on the account
If the account is over 190 days delinquent, be willing to settle the account fo a minimum of 70% of the balance and HAVE THE MONEY TO DO IT TODAY
Make sure they have the correct mailing address for you
Tell them the reason you can't pay the minimum payment

Programs to get current

Reage. An account is reaged two ways. First, pay the minimum monthly payment on or before the due date for 3 consecutive months. After the third month, the account become current. The interest, finance charges, late fees and over the limit fees are still in effect. That is the price of getting current without paying the full amount due. The second way is to pay the thee minimum payments at once on or before the due date. Then the account is considered current the following month.

Payment Matching. The company will match the payment by removing a portion of the balance. For example, if you make a $100 payment, they may be willing to match 20% or take off $20 off the balance. This will help with finance costs and may help you get under the limit. Always ask. The worst they can say is no.

Hardship Programs. These are short term to long term programs to get your current almost immediately. They calculate a new minimum payment from 1-3% of the balance. The program reduces your fees and interest any where from 25% to 100%. Also, the fees are usually stopped-imagine life without late fees and over the limit fees. That can save you $70 a month right there. But, be prepared for severe penalties. First, they will close the account permanently until the account is paid off. Second, if you miss one you can be kicked off the program and not be eligible to reapply from 1 to 5 years. Third, no fees or finance charges will be waived. But, the account gets current and that shows up on your credit report.

Paying the Amount due. That will normally take care of everything immediately. Just don't bounce the check.

Tips for managing your student loan

1 comment: