Educational Dream Becomes a Nightmare in the Face of Student Loan Debt

Posted by Rana & filed under Private & Federal Student Loan Consolidation.

Although once perceived as a ticket to a successful future and to financial security, a four-year university degree in America has become a ticket to years of debt slavery. Approximately 37 million American students are holding an estimated $867 million to $1 trillion in unresolved educational debt according to statistics compiled by the Federal Reserve Bank of New York.

Disturbingly, however, in 2012, for the first time, the majority of people who were unemployed were also college educated. The U.S. Congress reached an agreement to continue federal subsidies for these loans at 3.4 percent on June 26, 2012, preventing an interest hike to 6.8 percent. The majority of students who responded to a Yahoo News call for commentary, however, described their education as a burden and saw few avenues to resolve its effect on their lives.

Indebted Graduates Tell Loan Horror Stories

Tanya Carter, a 2008 graduate of the University of Toledo, drew on all the federal loans she could access and used private loan funding to finish her degree. She now says the decision ruined her life. She does not believe she will ever have the financial stability to marry and have a family, much less buy a home or even a car.

Fordham University graduate Lauren Dollard was more frank in her description of deferred life plans due to a $157,000 student loan debt. “My boyfriend won’t marry me because of my debt,” she told Yahoo. “He doesn’t want it attached to his name.” While Dollard added that his reasoning “could also be an excuse,” she said she’d trade her education “in a heartbeat” to live “as an independent adult.”

Private Loans Complicate Educational Debt Pain

Sentiments like these are common among hard-pressed graduates, especially those who have a mix of both federal and private loans. While federal loans have mechanisms to tie payment levels to existing income, and some venues for loan consolidation and forgiveness, there are almost no “outs” with private loans, and educational debt cannot be erased by bankruptcy.

A recent report by the Consumer Financial Protection Bureau cited borrower ignorance as a contributing factor to what many analysts call the impending student loan “bubble.” Salvatore Aiello, a 2009 University of South Carolina graduate told Yahoo that he does blame his own ignorance for his $68,000 debt.

“My high school did a terrible job explaining our options when it came to financial aid,” he said. “They made it seem that if I wasn’t rich or beyond poverty I would not be able to go to college.” Others, like Logan Canale, a 2009 graduate of Queens University in Charlotte, N.C. see no value in their education.

“My private college was way too expensive for what it was worth,” wrote Canale. “I just feel like I have been beaten by the system and taken advantage of. Who is making money off my education? Because it’s not me.”

Educational Debt Effects Parents’ Retirement

As an added complication to the educational debt crisis, many parents have felt compelled to cosign private loans for their children. In the recession, many of these same people saw their 401k and other retirement savings wiped out. They, too, are now increasingly enslaved to a burden of educational debt that will imperil the safety of their retirement.

Given the sluggish nature of the American economic recovering, the ongoing and contentious debate in the nation about escalating healthcare costs, and continued high unemployment, many young people are making the decision to skip college altogether. What this portends for the future talent and potential of the American workforce is frightening, but the truth is painfully clear. As it stands today, a college education in the U.S. is far more akin to a nightmare than the dream of a lifetime.

Can You Spot Student Loan Scams? 3 Ways to beat them!

Posted by Rana & filed under Private & Federal Student Loan Consolidation.

It’s not easy to attend a college these days. The average cost of attending traditional college is more than $27,000 (and this does not include other costs). Even if students cut down on books, gas and food costs by attending an affordable online college, they still have to pay for tuition. Current inflation has made it impossible for most students to afford higher education and they need to apply for loans to pay for it. While there are many federal and private financial lenders that provide loans, there are just as many scammers out there looking to make quick bucks by deceiving students and their parents.
Here are the most common college loan scams and ways to beat them. Read more on “Can You Spot Student Loan Scams? 3 Ways to beat them!” »

Student Loan Debt May Be the Next Economic Bubble to Burst

Posted by Rana & filed under Private & Federal Student Loan Consolidation.

In an interview with Yahoo Finance’s The Daily Ticker on March 30, 2012, former Clinton administration Secretary of Labor Robert Reich referred to the American economic recovery as “anemic,” and discussed the potential for outstanding student loans to be the next debt “bubble” to burst in the U.S.

Read more on “Student Loan Debt May Be the Next Economic Bubble to Burst” »

Understanding the Basics of Bankruptcy

Posted by Rana & filed under Tax & Bankruptcy Law Information.

The purpose of bankruptcy law is to provide a framework in which both individuals and businesses can resolve debt obligations they cannot otherwise meet. The term “bankruptcy” in the popular vernacular is used broadly, but in fact there are many types of bankruptcy proceedings.

The truth is that other attempts at debt resolution, like loan consolidation with financial counseling should be tried first, because a bankruptcy proceeding is the last resort. The action will destroy the individual’s credit and most often results in a business closing down completely.

Bankruptcy Types Divided into “Chapters”

The types of bankruptcy actions available in the United States are described as “chapters,” with each taking a different approach and being available to different types of debtors. The most common chapters are:

– Chapter 7 has been designed to completely discharge all debts via liquidation of assets and is open to both individuals and businesses.

– Chapter 11, on the other hand, is a reorganization or rehabilitation of a business. Under some circumstances, individuals may file for Chapter 11 if their debts are substantial and their assets considerable.

– Chapter 12 bankruptcy is specific to fishermen and family farmers, and offers a mechanism for rehabilitation.

– Chapter 13 offers individual debt rehabilitation or reorganization. It does not completely discharge the existing debts, but rather restructures them to allow for a program of repayment. This option was designed for people who have a regular income.

Of these chapters, the most common is Chapter 7. All assets are surrendered and liquidated, with the proceeds distributed to the creditors.

Some Property is Exempt from Bankruptcy Liquidation

Federal law, and the law is most states provides an exemption for specific types of property, for instance the debtor’s primary residence. Exemption laws do vary widely from state to state, however.

In the majority of cases, personal effects, household goods, and clothing are protected, as are the person’s home and automobile if the payments are current. In some states, the person filing for the bankruptcy can choose which exemptions will apply, state or federal.

States that allow for the use of federal bankruptcy law include: Arkansas, Connecticut, Washington, D.C., Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.
States that do not allow for the use of federal exemptions in bankruptcy cases are: Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

Why Would A Person Opt for Chapter 7 Bankruptcy?

Although there are serious consequences in filing a Chapter 7 bankruptcy proceeding, it does offer immediate relief and will eliminate large, unsecured debts immediately. Creditors can no longer engage in collection actions once the bankruptcy has been filed unless they have specific court permission to do so. The most common reasons cited for going forward with a Chapter 7 bankruptcy include:

– Financial suffering due to garnishment of wages.
– A large burden of unsecured debt.
– Suspension of the debtor’s driver’s license due to an unpaid judgment.
– Limited income or job loss that makes debt repayment impossible.
– Foreclosure of a home or repossession of a car.
– Temporarily stopping a foreclosure or repossession.
– Taxes owed to the federal government or to the state government.

If bankruptcy is being considered as an option, it’s best to work with a qualified bankruptcy attorney to facilitate the transaction both in terms of speed and ease of resolution.

Home Equity Loan

Posted by Rana & filed under Home & Mortgage Refinance Information.

In a home equity loan, the consumer takes out a second mortgage on their home by essentially borrowing against how much of the home they actually “own.” (Basically how much of their current mortgage amount has been paid.) That “equity” is measured against how much the property is currently worth on the real estate market to determine the amount that can be borrowed from a lender.

Loan Modification

Whenever a borrower is unable to repay their loan by its existing terms, and that inability is likely to be long-term, lenders may agree to a loan modification arrangement on the debt. Typically, this means lowering the interest rate, but lengthening the time required to pay off the amount. Of course, this also increases the amount the borrower will actually pay over the long-term, but it may be the only way to avoid a default on the loan. Read More

Home Equity Loan

A second mortgage is often called a home equity loan. Consumers go to a lender to borrow against their current equity in their property (how much of the existing mortgage has been paid) compared to the value of the home on the real estate market. The difference in the two is used to determine the amount that can be borrowed. Read More

Credit Monitoring

Credit monitoring is used to “keep an eye” on specific accounts to prevent identity theft. Often these services are associated with a single consumer reporting agency or authority. The entity collects information covered under the terms of the Fair Consumer Reporting Act. The major CRAs are Equifax, Experian, and Transunion. Read More

Credit Counseling

Credit counseling is personalized counseling that helps debtors avoid bankruptcy proceedings by providing basic financial management education. Often this is paired with negotiation services. The counselors work with creditors to reduce interest rates, lengthen payment terms, and take other steps that make a debt more manageable and subject to resolution over the long term.

Credit Report

A credit report is a detailed individual credit history that is compiled by a credit bureau and serves as a basis to determine an applicant’s credit worthiness for future loans. The report will include personal information like past and previous addresses, Social Security number, and work history. There will be a summary of the number and types of credit accounts and their current standing, as well as the details of any accounts that have been turned over to agencies for collection or garnishment. (All credit reports must include information on how the consumer may dispute errors in any of the data compiled.) Read More

Credit Repair

Credit repair is the process by which a bad credit report is “fixed” either by addressing mistakes it contains or resolving financial issues like debt resolution and loan modification. Often the process requires both financial expertise and legal counsel, with a goal of avoiding personal bankruptcy proceedings. Read More

Bankruptcy

A bankruptcy is a legal proceeding that may involve either an individual or business. Neither is able to pay outstanding debts, and turns to a legal process whereby the debtor files a petition with the court to declare themselves “bankrupt.” The authorities will then evaluate all the debtor’s assets, which will be used to repay a degree of the outstanding debt. When the proceedings are completed, regardless of the percentage paid, the debtor is completely relieved of all debt obligations and can, essentially “start over,” although without the assets that were liquidated. Because the liquidation of assets (which may not include an individual’s primary residence) is often a devastating process, most debtors seek other means of debt resolution for the specific purpose of avoiding bankruptcy. Read More

Garnishment

Garnishment is a legal process that seeks to resolve a debt owed by an individual to a third party. Often the third party is the person’s employer, but in many cases garnishment is used as a means to resolve outstanding federal taxes or to compel the payment of child support. In any of these cases, however, the process is the same. The amount that is determined appropriate in the legal proceeding is deducted from the debtor’s paycheck directly and used to resolve the amount owed. The idea is to take the money before the debtor can spend it for other reasons and direct those funds to repayment of the obligation. Read More

Consumer Financial Protection Bureau Proposes Debt Collector, Credit Reporting Oversight

Posted by Rana & filed under General Debt & Loan Consolidation Information.

In response to a flood of complaints about debt collectors and credit bureaus, the Consumer Financial Protection Bureau has proposed a new rule that would make the biggest players in these genres — including Equifax, TransUnion, and Experian — subject to the same oversight policies that apply to banks.

The agency, which was created under the 2010 Wall Street Reform and Consumer Protection Act, holds the somewhat broad mandate to regulate “consumer protection.” The Bureau’s creation and activities have been totally opposed by bank lobbyists and Republicans, and the current proposal is the group’s most ambitious action to date.

In a story by Tony Pugh for the Boston Herald, Richard Cordray, the director of the Bureau said, “Consumer financial products and services have become more complex over the years and they have expanded well beyond traditional banks. This oversight would help restore confidence that the federal government is standing beside the American consumer.”

Major Players in Both Arenas Will Be Affected

There are approximately 175 debt collection agencies that would be subject to the proposed oversight, holding more than $10 million in collection receipts annually. While the agencies represent only 4 percent of the actual number of existing collection firms, they do 63 percent of the yearly debt collection business in the United States.

Some 30 credit reporting agencies, holding $7 million in receipts from annual reporting activities would also face supervision. These firms account for 7 percent of the actual industry presence for the genre, but bring in 94 percent of industry revenue.

Increasing Debt Collection Lawsuits and Credit Reporting Errors

The proposal comes in response to the escalation of federal consumer lawsuits filed since the start of the “Great Recession,” which is now believed to have begun in 2007. That year, there were only 4,372 lawsuits filed under the Fair Debt Collection Practices Act. In 2011 alone, there were 11,811 such lawsuits filed.

The three largest credit reporting agencies — Experian, Equifax, and TransUnion — annually compile financial data on 200 million U.S. consumers, generating reports that are used to determine not just credit ratings, but also job worthiness. According to the Consumer Data Industry, 36 billion credit reports are updated each year, with 3 billion new reports generated.

Inaccuracies on these reports plague consumers, who are often frustrated by the difficulty in getting those mistakes fixed. Estimates suggest that 79 percent of all consumer credit reports are either missing information, show out-of-date account balances, include false delinquencies, or contain other errors.

Trade Associations Downplay Need for the Oversight

In response to the call for oversight, Mark Schiffman, the public affiars director for the Association of Credit and Collection Professionals, said the group will use the 60-day comment period on the bureau’s proposed rule to determine if the guidelines are “overly burdensome.”

Additionally, he said the increase in complaints about debt collection were due to attorneys exploiting the profit potential of the recession. “It’s not an assumption, it’s a fact,” said Schiffman. Attorneys see consumer lawsuits as a viable “cash cow.”

Dave Ramsey Says He’s Telling You the Truth About Debt Consolidation

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Dave Ramsey says he’ll tell you the truth about debt consolidation. The process doesn’t work. Debt isn’t the problem. It’s the symptom. The only way you can resolve your debt is to change your habits. And he’s right. Most of us get into debt for one reason. We spend without discipline, generally using high interest-rate credit cards.

Debt Consolidation Takes Longer and Costs More

Here’s the scenario Ramsey sketched out in his article. You go into a debt consolidation agency with $30,000 in unsecured debt that is comprised of two loans, $10,000 at 12 percent and $20,000 at 10 percent. The terms on the loans are two and four years respectively. Every month you’re shelling out $1,100 in payments and you don’t make enough to do that and live.

So, the consolidation agency says they’ll negotiate with your creditors and get your payment down to $640 a month at 9 percent. You walk out with $460 more money a month in your pocket. Ramsey says what the company doesn’t tell you is that you will now need six years to resolve your debt and that you will pay $46,080 to do it, as opposed to the original $40,392.

Debt Consolidation Companies Aren’t’ Charitable Entities

In big bold letters he says, “They make money off of you.” Well, of course they do. No one ever said loan consolidations were charitable entities. They’re in business to make a profit, and yes, you’re going to pay more for a longer period to erase your debt. And, in the meantime, you’ll eat. There’s nothing to stop you from paying more in a given month and thus resolve the debt faster. That’s what Ramsey doesn’t tell you.

He is quite right that a lack of discipline gets people into debt and that cultivating disciple gets you out. What he doesn’t point out is that most people need time to make the necessary changes to re-direct their lives, to get into a higher paying position, to live on less, and to claw their way out of the hole. Debt consolidation buys time.

Use Debt Consolidation as a Tool

When people really get into trouble with debt consolidation is when they go into the process with the same cavalier attitude that created their money problems in the first place. Never sign on the dotted line until you understand every aspect of the consolidation deal — including how much additional interest you will pay and how long you will have to work to resolve your loans.

In a way, Ramsey is almost being insulting when he suggests that people go through debt consolidation and believe the debt just disappears. Rolling all your debt into one lump sum at a lower interest rate with a single payment isn’t making debt disappear. It is managing the debt in the short term.

Yes, you can simply follow the terms of the deal, pay the extra interest, and let the time bleed out until the debt is resolved. You can also get proactive, take advantage of the decreased pressure in your life, and use the additional money in your pocket to make the very changes that will put more money in your pocket.

How Much Faster Can You Resolve the Debt?

One vital question you need to ask the loan consolidation counselor is, “How much faster will my debt be resolved if I pay X percent more each month?” Make that your goal. Know what it will take to reduce your debt faster and work toward that next level. And then when you get there, call the company up and ask the same question again.

Ramsey does indeed reveal the hard truth about debt consolidation, but he isn’t exploring the fact that debt consolidation is a tool. And, like most tools, if it is used intelligently and well, it can accomplish more than one task. Use the process to buy time and then do exactly what Ramsey says, get disciplined and get debt free.

Paying of Christmas 2011 Means More Discipline in 2012

Posted by cmsadmin & filed under General Debt & Loan Consolidation Information.

Now that the holiday season is over, the credit card bills are coming due — about $52 billion spent over just the Black Friday weekend. A primary rule of debt consolidation is not to get hung up on what you did, but on what you can do about it now.

Look Your Debt in the Face

First, take an inventory of just how bad the situation really is. Sit down and list out everyone you owe money to and make note of the interest rates. That will let your prioritize your debt from most to least expensive.

Your first task is to take care of your credit card debt. If possible, combine all of the balances on the card that has the lowest rate so you’re only looking at one monthly payment. And then discipline yourself not to add to the debt. Pay with cash only, or with a card you know you can keep at a balance of zero monthly.

You Need a Plan to Reduce Your Debt

Debt management is about organizing your obligations and conceiving of a plan to reduce them. For many years, people have turned to refinancing their mortgage and using the equity they hold in their homes to resolve more pressing debts.

Unfortunately, with the collapse of the real estate market and the mortgage crisis, that line of credit is now hard, if not impossible, to access for many people. Many good, hardworking folks are struggling under debt loads that may take a lifetime to resolve.

Loan Consolidation May Be the Answer

Debt consolidation and loan consolidation are greatly misunderstood terms and a vast negative mythology has built up around the process. Even if you are afraid, there is some wisdom in the strategy “do it afraid.”

Seeking a consultation for loan consolidation does not mean you have to move forward with the process. It does mean you will have an offer on the table to consider. Do not lose sight of the fact that debt consolidation professionals may be able to negotiate with your creditors for a better interest rate or for an extension on the life of the loan.

Having One Monthly Payments Lets You Budget

It is a major advantage to face a single monthly payment, because you can budget for that amount and not be constantly shifting money around to meet obligations with a sense of desperation.

One thing is for certain. The end of 2011 showed that consumers have not yet learned their lesson when it comes to the heavy burden of credit card debt. As those bills are coming due in January and February, many will realize they are worse off than they were before the spending urge hit. Loan consolidation and a healthy dose of discipline for the New Year are likely now in order.

Consumers Were Lured to Use Credit During the 2011 Holiday Season

Posted by Rana & filed under Credit Card Debt Consolidation Information.

For months now, financial experts have emphasized the need for renewed consumer confidence to bolster the sagging American economy. According to data collected by the Federal Reserve, Americans did just that over the Black Friday weekend, to the tune of $52 billion. Unfortunately, that “money” was actually spent with the swipe of a credit card, a disturbing indication that even after three years of recession, the national love affair with “easy” money has not dimmed.

Read more on “Consumers Were Lured to Use Credit During the 2011 Holiday Season” »

Student Loan Debt Creeping into Upper Age Brackets

Posted by Rana & filed under Private & Federal Student Loan Consolidation.

While student loan consolidation has been at the heart of many of the “occupy” protests that began late in 2011, few people realize that older Americans are also building up education-based indebtedness that could well follow them for the rest of their lives. According to a report by Reuters released just this month, borrowing money to finance an education has increased in every age group, but the highest jump is in the 35 to 49 age bracket. Over the past three years, older students have racked up a 47 percent increase in debt levels directly attributable to the recession.

Many Returned to School as a Recession Shelter

With the unemployment rate hovering just under 10 percent for most of 2010 and 2011, older workers were often the first to lose their jobs as employers worked to trim costs. These older, laid-off workers found it difficult to compete against younger job candidates in their original career fields, and hoping to ride out the recession in a positive way, many returned to school, either to finish their degrees, to seek a higher credential, or to enter a completely new field. With their retirement savings already badly depleted by the rocky, erratic performance of stocks on Wall Street, these returning students opted to go into debt, essentially rolling the dice for a better future.

Alarming Debt Accumulation Foretells Future Disasters

Most analysts agree that the accumulating debt in this age group is alarming. Americans in the 35 to 49 age group tend to carry the bulk of their equity in their homes. The decision to return to school, and to finance that education with student loans, could well mean that if these people are not able to find a job that will both support their lifestyle and meet their debt obligations, they could lose their primary residence. Certainly retirement will be a long-deferred decision if it is possible at all.

This also begs the question of long-term care and insurance benefits. Even in the face of the so-called “reform” of the health care system in America, 52 million people have no health insurance coverage, and last year rates increased 8-9 percent. Medical debt is responsible for more than half of the personal bankruptcies filed in the U.S. each year. All of these factors taken as a whole create a potential perfect storm of financial woes in an age group that typically is enjoying its greatest degree of monetary stability in their lives.
Managing Debt Responsibly is Imperative

Since student loan indebtedness in America is now just under $1 trillion, managing those obligations in tandem with other debts, like credit card balances or a mortgage have signaled an end to America’s free money days. Now more people than ever before are seeking to consolidate their loans at a competitive interest rate so they can pay down their balances while maintaining the quality of their lives. Without this kind of responsible debt management, we could see a whole generation of Americans entering old age poorer than at any point since the 1930s.