We knew it was bad, but now it looks even worse than we thought. Twenty-seven percent of student loan borrowers are a month behind on their loan payments. Keep in mind, this debt cannot be discharged in bankruptcy; these borrowers are stuck with it no matter what.
From Zero Hedge:
…if we adjust the delinquency rate to consider that only a fraction of the borrowers have payments due, this level of delinquency is very concerning: A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment. This level of delinquency is much higher than for any other type of debt (credit cards, auto loans, mortgages, and so on).
For my regular readers, this will come as no surprise. From CNN Money:
Roughly half of Americans are saving 5% or less of their incomes, including 18% that are not saving anything, according to a survey from Bankrate. Only about a quarter of people are saving more than 10% of their earnings.
I have a problem with the way they presented the survey, lumping people saving >5% in with those saving nothing. Making the transition from non-saver to saver is the most important step you’ll ever take in your financial life, even if you’re only saving 1%. Saving small is a starting place; in time, as you develop better habits and are able to watch your savings grow, it will be easier to save a larger portion of each paycheck.
It seems like up until a few years ago, personal finance literature focused on getting people to give up overpriced luxury items like Starbuck’s coffee.
The argument went like this: if you buy 5 of those lattes a week at $4 each, that’s $1,040 per year you’re spending on coffee. If you contributed that $1,040 to your IRA instead, after 40 years you’d have $222,154. Therefore, giving up coffee will make you $222,154 richer. Case closed.
The math is alluring, but somewhere between theory and reality there’s a breakdown. My favorite retort to this kind of logic is the following from Reddit:
Here’s another personal interest story from CNN Money. It tells the sad, yet familiar story of 3 people in their 20s who have a ton of student loan debt ($56k-$114k).
What’s most telling is that there is no mention of what kind of degrees they hold. Finance? Communications? Trans-alpine paragliding? What?
Not all college degrees are created equal.
Two prime ministers are sitting in a room discussing affairs of state. Suddenly a man bursts in, apopletic with fury, shouting and stamping and banging his fist on the desk. The resident prime minister admonishes him:
“Peter,” he says, “kindly remember Rule Number 6,” whereupon Peter is instantly restored to complete calm, apologizes, and withdraws. The politicians return to their conversation, only to be interrupted yet again twenty minutes later by an hysterical woman gesticuating wildly, her hair flying. Again the intruder is greeted with the words:
“Marie, please remember Rule Number 6.” Complete calm descends once more, and she too withdraws with a bow and an apology. When the scene is repeated for the third time, the visiting prime minister addresses his colleague:
“My dear friend, I’ve seen many things in my life, but never anything as remarkable as this. Would you be willing to share with me the secret of Rule Number 6?”
“Very simple,” replies the resident prime minister. “Rule Number 6 is ‘Don’t take yourself so g–damn seriously.”
“Ah,” says his visitor, “that is a fine rule.” After a moment of pondering, he inquires, “And what, may I ask, are the other rules?”
“There aren’t any.”
If you have charge-offs or collection accounts on your credit report, you’ve probably heard that debts can no longer be collected after the statute of limitations expires. That’s true–sort of. The devil is in the details, though. So here are some important distinctions about running out the clock on old debt.
On a personal note, I have done this myself. I had a few charged-off credit cards that went into collections several years ago. Some lenders had sold the debt, and others had kept it and hired collection agencies to try and collect.
At this point, I was well into my credit repair journey, and I knew that if I could make it 4 yeas from the date of first delinquency (without getting sued or doing something to extend the statute of limitations–more on that later), I was home free. At the time though, 4 years (the statute of limitations in my state) sounded like forever.
Running out the clock should never be your Plan A. It’s more like Plan B, C, or D. But you need to be aware of the statute of limitations and some other important info no matter what your plans are.
Did you know that money you owe to the government can end up in collections just like credit card bills or medical debt? That’s right. Here, CNN has an exposé on the largest collector of government debt in the country.
Key Points:
- Debt collectors often get details wrong. That’s one of the reasons that 70% of people have errors on their credit reports. Combine lots of errors with an enormous bureaucracy that is difficult to deal with, and you have the recipe for prolonged battles to get errors rectified.
- Dealing with debt collectors is kind of like dealing with robots. So many processes are automated that there are few points in the process where human judgment can intervene to correct problems.
- Document everything. This may be your best defense.
Big news out of the New York Attorney General’s office. From CNN:
Experian (EXPGF), Equifax (EFX) and TransUnion, the three main agencies that track your credit, have agreed to follow new guidelines to handle disputes on your reports, according to a settlement announced Monday by the New York Attorney General.
This is huge news. Disputing information on credit reports is a big part of credit repair, and if you’ve ever gone through it, you know it can be frustrating to watch the credit bureaus acting in seemingly incomprehensible ways to simple requests like “this account isn’t mine; please delete it.”
It’s not clear at the moment how this will affect people in other states, if at all. The settlement could prompt action from other states’ attorneys general in a piecemeal fashion. The feds could even get involved in the form of the CFPB.
The hardest thing in the world to understand is the income tax.
