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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Sunday, May 01, 2005

My Student Loan Debt Horror Story

Student Loan Debt Horror StoryI have a very personal story to share with all you people out there with student loan debt. I am sharing this story in the hope that as many people as possible can learn from my mistakes. This is a true story that happened to me back in 1999.

I had been out of school for quite a while. I was working at a big law firm in New York City making a decent living, paying my bills and some of my debt. I had (foolishly) incurred a lot of credit card debt in my youth and I was really paying for it. I also had about $11,000 in student loan debt from a Federal Subsidized Stafford Loan I had taken out when I was in school. I wasn't paying my student loan debt. In fact, I completely ignored my student loan debt, throwing all the threatening letters I received into the trash! My thinking was, "what could they do to me? If I ignore the debt the government will step in a pay it off. Besides, those monthly payments are way too high!" There was a moderate amount of guilt associated with my actions, but it's hard to feel sorry for the richest government that has ever existed on the earth.

So I was moving along with my life, happy to be slowly improving my credit rating by paying of my old credit card debt. I got a raise at work and started investing a large chunk of my paycheck into my employer's 401K plan. Yeah, things were OK and getting better. It was at this point in my life that I opened a business checking account because I had big plans of quitting my job and starting my own business. I started making small deposits to this account every week or so and soon I had over $1000 in that business account. And that's when it happened.

One day, I was performing a routine balance check on my business bank account and found that my bank account was completely empty! Shock? Horror? No, it was more than that. I nearly fainted! I immediately got on the phone with the bank to get an explanation. They informed me that my money was legally withdrawn from my account by a law firm representing the government in student loan default matters. I got the phone number for that law firm and called. They told me that they had obtained a "judgment" against me in court 3 or 4 years prior, and that they had every legal right to seize any and all money in my bank accounts. Wow. That's some serious power, eh?

So, all those threatening letters I was throwing away: I really shouldn't have done that! If I had responded to those letters, I would have been able to avoid the nightmare that I have just described. If I had contributed a little less to my 401K and made payments on my student loan, I would have avoided having my bank account emptied. And to add insult to injury, because my business bank account was empty, the bank assessed some very large and nasty fees due to lack of funds.

Hey! Learn from my mistakes! Consolidate your student loan debt and do it now while interest rates are still low. If I had consolidated my student loans years ago, I would have been able to secure a fantastic interest rate, which would have made my monthly payments far more manageable and I would have been much more inclined to keep up with my student loan payments.

The market for money for the average consumer is the best it's been for many years. Take advantage and get a great consolidation interest rate for all your student loans. The economy will be strong again soon, and that means higher interest rates. If you don't consolidate your student loan debt now you'll probably regret it. I am not saying to go for the first student loan consolidation offer that comes your way. You should shop around for the best consolidation deal, just as you would shop around for the best mortgage or credit card deal. Nowadays, there are a plethora of organizations out there that specialize in buying student loan debt (it's obviously a very profitable thing to do these days.) All that competition is great for you, the consumer, so let the consolidation companies fight for your business. Don't settle for anything but the very best deal.

Thanks for reading. Comments are always welcome.

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