I Settled, Now I'm Screwed

Well big news in my finances today. Remember that private student loan that I, um, defaulted on? And the Evil Collection Agency it was assigned to? It's okay if you don't but believe me, it's been keeping me up at night. I've read a lot about debt collection procedures and this Collection Agency in particular over the last couple of months. I've considered going to a Consumer Credit Counseling agency. I've struggled with how I was going to deal with this debt because the company was simply not going to put me on a payment plan.

What I discovered was that they would mostly likely relent over time and suggest a payment plan. And the details I found about payment plans offer to debtors in similar circumstances were the same as what I worked out with Nice Collection Agency, a one time downpayment of 10% of the outstanding balance, plus monthly payments.

That's all well and fine when it worked out with Nice Collection Agency, to whom I owed a measly $3000, but this debt is far larger - $28,050!!! How was I going to come up with $2,800?

I resolved I would get past some current obstacles and then worry about saving up for the day the offer came and perhaps visit a Consumer Credit Counseling agency. But, alas, today Evil Collection Agency called me and offered a payment plan with NO DOWN PAYMENT.

The payment plan they offered was $260 a month - the best they could do because they can't extend payments for more than 9 years. No interest - just the full amount I owe payable in a little less than 9 years.

This is why I am very happy about this arrangement:

• Stops the phone calls, the letters, the general fear that I would be sued, thrown into Debtor's Prison, have my wages garnished, tax refunds seized, etc.
• Finally owning up to what has been by far my biggest financial mistake to date.
• Paying the actual amount I owe instead of having it affect me down the line with attorney's fees, late charges, so on and so forth.
• Payment in nine years with no interest is actually a MUCH better deal than the original term of the loan - 25 years at high interest rate (not that I suggest defaulting to anyone!).
• No judgement on my credit report (though the CA will most likely be there unfortunately).

Here's why I'm not so happy about the agreement:

• Holy crap, I don't actually have $260 and the check NEEDED to post this month or they would "take further action." From what I've been reading about debt collection, this is most likely a crock of s**t but it was enough for me to agree. Need to devote the next seven days to finding an extra $180 laying around - more on this later.
• Holy crap, I'm going to be paying almost $800 a month of debt - a full third of my salary!

I'm trying to focus on the positives - the private loans will both be gone in less than 9 years. I wanted the education and I'm glad I got it, but damn....that's all I have to say about that right now.

My advice to students pursuing higher education - don't take out private loans!