Debt Facts
Knowing your debt is the first step to conquering it. Whether it is student loans, credit cards or even a mortgage, there are valuable tools that can help you understand and overcome your debt. Read more on debt strategies on ADA Center for Professional Success
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Permanent Record
Keep Track of Each Individual Loan:
Lender’s Name and contact information
Balance
Repayment terms and status
Grace period information
Stay in Touch:
If you change your address, email, or phone number, tell each lender right away
Open and read all correspondence from lenders
Late payments and non-payments affect your credit score
And Remember:
Make payments on-time, every time
Check your credit report for accuracy
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Credit Agencies
Most credit agencies keep your credit history for seven years, so it’s easy to see how a poor credit history could affect future efforts to buy a practice or purchase a home.
You can get a copy of your credit report by sending a written or online request to any of the following agencies:
Equifax
800.685.1111
equifax.com
Experian
888.397.3742
experian.com
Trans Union
877.322.8228
transunion.com
Under the FACT ACT amendments to the Fair Credit Reporting Act, consumers are entitled to one free Personal Credit Report in a 12-month period from each agency.
For more information, or to request your free annual report online, visit annualcreditreport.com. To maximize this benefit, you may request your credit report from a different agency every four months.
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Understanding Delinquency and Default
Delinquency is late payment.
Default typically means 270 days of repayment delinquency.
In addition to putting your credit at great risk, it could jeopardize your license in some states.
“The government has nearly boundless powers to collect student loans, far beyond those of most unsecured creditors. The government can garnish a borrower’s wages without a judgment, seize his tax refund, even an earned income tax credit, seize portions of federal benefits such as Social Security, and deny him eligibility for new education grants or loans. Even in bankruptcy, most student loans must be paid. Unlike any other type of debt, there is no statute of limitations.”
-National Consumer Law Center, The Student Loan Default Trap, NCLC.org, July 2012.
Bottom Line: If you can’t repay your loans for any reason, contact your loan provider immediately. You may be able to put your repayment on hold temporarily. Deferment options vary and it’s not available to defaulted loans — so understand the terms of your loan before you sign a loan agreement.
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Compound Interest
A Snowball Rolling Downhill
All that interest begins to accumulate interest which, in turn, accumulates interest in a process known as compound interest. Compound interest is like a snowball rolling down a snowy hill, getting bigger and bigger as it goes.
Repayment schedules for two different student borrowers paid over 10 years.
| |
Student A
|
Student B
|
| Amount Borrowed |
$85,000 |
$100,000 |
|
Length of Loan
(Years)
|
10 |
10 |
Interest Rate
|
6%
|
6%
|
| Monthly Payment |
$943.50
|
$1,110.00 |
Total Amount Paid
over 10 years
(120 months) |
$113, 220 |
$133,200 |
Repayment schedules for two student borrowers paid over 10 and 15 years.
| |
Student A |
Student B
|
Amount Borrowed
|
$100,000
|
$100,000
|
Length of Loan
(Years)
|
10 |
15 |
Interest Rate
|
6% |
6% |
Monthly Payment
|
$1,110.00
|
$844.00
|
|
$133,200
|
$151,920 |
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Budget Checklist