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!

I Found My Student Loan!

So you'd think if you owed someone over $28,000 they would make it pretty easy to get in touch with them, correct? Well, alas, that is not the case. About a year ago, I was hounded relentlessly from my Private Student Loan lender. They called my parent's house, they called me, so on and so forth. Until finally, Dad decided to allow them automatic access to his account. It was something we had talked about while I was still in college and I knew he had committed himself to help me pay off this loan.

Ever since the automatic payments were set up, they have ceased all contact, only sending me a receipt of interest paid for my taxes (sent WAY after I had already filed BTW, but I already deducted the maximum $2,500 for this anyway). Part of my July Goals (which I'm thinking about early) was going to be "Find Private Loan Lender."

But, alas, I have found them. See, the Lender and the Guarantor all have different names from the original Loan Company I got this loan from, making it hard to figure out. And while there is a free lookup at the Department of Education for any federally insured student loans, the same does not exist in the murky Private Loan industry.

It was frustrating to see that despite a YEAR of Dad making a $303 monthly payment, my Principal Balance has only gone down about $1k. So....as soon as I can swing it, I am going to devote all extra cash towards making additional payments to this lender.

But first, I need to:

1. Pay off all short-term debt (Boyfriend, Friend C; maybe Utilities even though I reached a Settlement Agreement with them).
2. Pay off Capital One (This is almost a Short Term Debt as I only owe about $400 on it).
3. Build Emergency Fund

But hopefully I can start making regular payments to this loan on top of Dad's monthly contribution.

Chef Dreams Halted Due to Student Loans

Wow, this article from the New York Times today really put things in perspective for me a little. Apparently students are entering culinary school and are unable to pay off their debts after graduation. Many of them are defaulting. The article mentions how one student was urged by their school to take out private loans in addition to the federal ones and now is working as a cook earning $20k a year.

I hate to think of anyone having an experience like that, especially if it discourages others from pursuing their dreams. I think that private loans are really dangerous (as you can tell from my expeience). Luckily I only took out two of them during my 7 years of school. The rest of the money owed after federal loans were exhausted was paid by my parents and a generous fellowship I received in graduate school. Most of my friends in graduate school took out private loans for all three years.

I also think that while my degree (and the professional licensing that came with it) was neccessary to pursue my dream, perhaps culinary school isn't as much. Now I don't know much about the industry, but I do know that there is a very good community college with a culinary program near where I live. It seems to me too many schools are urging students to pay amounts that exceed the federal student loans as part of a racket. There has been investigations going on in New York about schools receiving kick backs from lenders.

I guess I should consider myself lucky to have a marketable degree with earning power (even though it's not earning me quite enough right now) and a job in my preferred field. Me lucky, how about that!