Guest post from Mary of Adventures In Frugal Land
I see a lot of stories on MoneySavingMom.com about people who paid off their debt or bought a house debt-free. I applaud everyone who has been able to do that; but today, I want to touch on a subject not often brought up.
I am going to tell you about the time I defaulted on my student loans. It’s an embarrassing story, but one that I hope will help someone else in the same situation.
When I entered college, I never expected to accumulate a ton of student loan debt. However, since I was not considered an “independent student”, my parent’s income factored into my financial aid package. This lowered the amount of aid I qualified to receive – even though they were not in a position to help with my schooling.
Looking back, I should have taken a year off and worked full-time to cover the tuition, instead of taking out loans. Like many students, I didn’t think of the long term ramifications of my student loan debt. I wasn’t concerned with making payments while I was attending school, even though it would have saved me a fortune in interest! I was young and naïve. I thought that once I graduated, I could easily afford to pay it off in one or two years.
I didn’t expect to have such a difficult time finding a decent job. I didn’t expect to face divorce or to be a single mother.
While I tried to make my monthly payments, I wasn’t always able to – because feeding my daughter took priority. Within a few months of missing my payments, I was in default.
This SHOULD BE the part of the story where I tell you that I grew up and took care of it. But it’s not. Instead of dealing with the phone calls and letters, I ignored them. I let the letters pile up without opening them. I ignored it.
As I’m sure you can imagine, that didn’t work out so well for me. Now, looking back, here are a few lessons I learned from this situation:
Lesson # 1: Ignoring the Problem Doesn’t Fix It.
At that time, I was in the lowest financial situation that I’ve been in. My tax refund was going to help pull me out of the hole. Can you guess where this is going?
Lesson # 2: The Threats Are Real
I knew that there was something called an offset, but I never bothered to figure out exactly what that was. Again, I was young and immature.
That year, my federal income tax refund was offset (automatically taken from me) and sent to the Department of Education. That was a wake-up call for me. I did not want to take the chance of this happening again so I contacted the loan holders.
Lesson # 3: The Loan Holders Aren’t Scary
Surprisingly, they were very pleasant to talk to. I really have no idea as to why I was so afraid before. Just pick up the phone and dial.
Lesson # 4: There Are Programs That Can Help
Please, if you are having trouble making your monthly payments, don’t be afraid to contact your loan holders. There are so many programs that can lower your payments. I could’ve saved myself a lot of time, money, and stress if I would have just answered the phone when they started calling me.
Lesson # 5: Never Do That Again
After I learned how to get out of default, I promised myself that I would never get into that position again. I now monitor my accounts daily and try to pay extra on the interest. I look forward to the day that I am officially out of debt!
Have you ever defaulted on a loan payment? If so, what did you learn from that experience?
Mary blogs at Adventures In Frugal Land about saving money, earning money and spending money from a low income point of view. She is also the author of the ebook, “Poor Me: Practical Advice For Navigating Welfare”.