Thoughts on Debt

Recently I was appalled to find out that the company I hold my student loans with, Sallie Mae, would no longer allow me to consolidate my student loans.  By doing this, they are in effect forcing people’s loans into repayment, and with the economy being so unstable, there are a lot of people who will be unable to make the payments on their student loans.  This can seem a very desperate situation, and I think that perhaps this new rule was made in effect to get more people paying off their Federal Student Loans, because after all we all know that the government is in some serious need of funds.

If you find yourself in this situation, there are other options available to you that you must be aware of.  One of which is to consolidate your loans with an independent company.  This would allow you more forbearance and economic hardship time while also allowing you to consolidate your loans at a lower interest rate, and this option can also allow you to extend out your repayment period from 10 years to 30 years, thus significantly reducing your monthly payments.

There is also another option to pay on the interest of your loan for 4 years, with then an option that if you still can’t afford to pay it off, then there is some type of option to free you from your loans, but I am not really clear on the terms and conditions, and would need to look into further before I could recommend this as a workable alternative.

It is my opinion that consolidation is the way to go and finding a company with a reasonable fixed rate that can extend out your payment terms and reduce your monthly payments is probably the best way to go.  Just be sure that the company you are dealing with will allow you to keep your loans federal status, turning them into private loans can be a big hassle and can cause you to lose a lot of the benefits you have from Federal Student Loans.

Well, the government has been on this band wagon for years.  They have been looking to rid themselves of the payday loan industry claiming that they are ripping people off.  Don’t get me wrong they do charge exorbitant rates on their loans, there is no doubt that this is true, however I can’t help but wonder if they really are just angry because that is money that they are losing each year, and they don’t want the competition.  Think about it, you can pay $15.00 per hundred to borrow from a payday loan place, or you can possibly bounce a check and be charged $35.00 so really is that so unreasonable.  Plus many of the people who choose to take out payday advances are people who can’t get approved for government loans with lower interest rates, so what are they really losing, if they aren’t providing services to these people.

Now many states have completely banned payday loans making them illegal, but many more states are trying not to completely do away with them, but merely limit the terms, interest rates, and number of loans a person can take out.  One such reform in the state of VA has a lot of payday loan companies scrambling to find new services to provide and new ways to get around the coming laws.  With many people paying them millions in interest every year, they are not sure how they will make it, and many people are worried because a new database will not allow you to have more than one loan at a time.  The concerns are great, but the best advice I can give to you is if you currently hold a payday loan, find out about the changes in your area, and be sure to get the facts.  It is a good idea to begin paying your loan or loans back now, so that you don’t get stuck after the first of the year.  Some companies will change the game in 2009 and others may have to close their doors completely, so be sure you get out of this system before it is too late!

Most American’s are carrying a lot more debt than they can afford.  Credit card debt in the US has reached a record high - Nearly $1 trillion, according to the latest figures from the Federal Reserve Board.  The average American household’s debt from credit cards has risen from $2966 in 1990 to $9840 in 2007.

As getting loans becomes more difficult and the cost of groceries and medical bills is on the rise, more and more people are turning toward plastic instead of cash to meet many of their basic needs.  For many of us easy credit has lead to spending well beyond our means.

The debt crisis in this country however, is created less by our spending and more as a result of an industry devoid of regulations and checks and balances.  For too many years, the credit card industry has been allowed to run rampant with charges and additional fees well beyond what is reasonable.

Consumer complaints and pleas for help may be having an effect.  Both the Federal Reserve and Congress have proposed new rules that have broad support.  Unfortunately, action has not yet been taken, but it is on the horizon.

The real problem is that the credit card companies make the most money on those of us who can’t afford what we spend.  This is why if you pay your bill in full every month, the credit card companies have a term for you and surprisingly they think of you as a “deadbeat”.  They deliberately target those who can not afford to pay their bills.  As a matter of fact, if you are having trouble paying your credit card bills, then you will more than likely receive some extra credit card offers in the mail.  They all want you to borrow from them.

We can hope that the legislation will soon be coming down the pike to give these big companies what they truly deserve and perhaps bring some relief to us all.