Programs to Help Get Out of Debt for College Students

Congratulations!  You've invetsted in yourself by getting loans and getting a college education.  Now the tough part, paying down those loans.

Here's some information you should know:

Help yourself

Developing a Budget: The first step toward taking control of your fiscal situation is to do a realistic appraisal of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your “fixed” expenses — those that are the same each month — like home payment payments or rent, automobile payments, and insurance payments. Next, list the disbursements that change — like entertainment, recreation, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending habits, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

Your city library and bookstores have information about budgeting and money management proficiency. In addition, computer software programs can be useful instruments for developing and maintaining a budget, balancing your checkbook, and following plans to save money and pay down your debt.

Debt Management Plans:

If your debt troubles theme from too much debt or your inability to repay your debts, a credit counseling authority may urge that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial state of affairs, and has offered you personalized advice on managing your money. Even if a DMP is right for you, a honest credit counseling organization still can help you create a budget and teach you money management techniques.

In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card debts, student loans, and medical bills, according to a payment schedule the counselor makes with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they make available the concessions that a credit counseling organization describes to you. A reputable DMP requires you to make regular, timely payments, and could take 48 months or more to finish. Ask the credit counselor to estimate how long it will take for you to accomplish the plan. You may have to agree not to apply for — or use — any extra credit while you’re active in the plan.

Credit Counseling:

If you’re not knowlegable enough to create a practicable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling companies are nonprofit and work with you to solve your money problems. But be aware that, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling companies charge high fees, which may be hidden, or urge people to make “voluntary” contributions that can cause more debt.

Most credit counselors offer services through local offices, the Internet, or on the phone. If possible, find an organization that offers in-person counseling. Many schools, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your fiscal institution, local consumer protection office, and friends and family also may be good sources of information and advise.

Reputable credit counseling companies can advise you on managing your money and debts, help you design a budget, and provide free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire fiscal situation with you, and help you develop a personalized plan to solve your money worries. An initial counseling session typically lasts an hour, with an provide of follow-up sessions.

Dealing with Debt Collectors:

The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t sanction of the calls. Collectors may not hassle you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to halt further contact.

Managing Your Auto and Residence Loans:

Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your auto for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your automobile or foreclose on your household. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Most automobile financing agreements allow a creditor to repossess your automobile any time you’re in default. No notice is required. If your auto is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car. If you see default approaching, you may be better off selling the auto yourself and paying off the debt: You’ll avoid the added costs of repossession and a unfavorable entry on your credit report.
If you fall behind on your house payment, contact your lender in real time to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an increased amount toward the past due total. Other lenders may agree to change the terms of the house payment by extending the repayment period to reduce the monthly debt. Ask whether extra fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling office. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who’s having trouble making home payment payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling company near you.

Contacting Your Creditors:

Contact your creditors now if you’re having stress making ends meet. Tell them why it’s hard for you, and try to work out a new payment plan that trims down your payments to a more manageable grade. Don’t wait until your debts have been turned over to a debt collector. At that point, your creditors have given up on you.

All the best to you!