1 million people default on their student loans each year

In excess of 1 million student borrowers every year go into default.

There is an abundant amount of education debt in the U.S. and it has tripled in the course of the most recent decade and now surpasses $1.5 trillion, representing a more noteworthy weight to Americans than auto or charge card obligation.

For some, the installments are demonstrating unmanageable. By 2023, about 40 percent of borrowers are relied upon to default on their student loans. That is the point at which a person has not made an installment toward their education’s debt in around a year, trigger it being sent to an outside collector.

Who are in danger of defaulting? What’s the monetary effect on them of doing so?

Another report from the Urban Institute, a dynamic research organization in Washington, D.C., answers these inquiries. The scientists broke down the destinies of borrowers who entered reimbursement in 2012.
Federal loans come with a lot of protections that should make default rare, said Kristin Blagg, a research associate at the Urban Institute, focusing on education.

In any case, she realized, that isn’t the situation: Within four years in the wake of leaving school, almost a fourth of the borrowers had defaulted. “To default is still quite normal,” Blagg said.     

She included, “I found that these are borrowers who have a tendency to be in budgetary misery.”

Defaulters are more improbable than non-defaulters to have kinds of obligation that require a risk assessment, similar to charge card, auto and home loan obligation. They’re more probable than nondefaulters to have their utility and hospital expenses fall into accumulations, also.

Blagg said these additional debt pressures can explain, at least in part, why some borrowers might be putting off their student loan payments.

Individuals who default on their understudy advances will probably live in Hispanic and dark neighborhoods, Blagg found. Past research has demonstrated that minorities are more loaded by their training obligation, since they have less parental riches to draw on and in addition higher rates of joblessness.

In addition, the normal defaulter lives in a territory where the median income is around $50,000, contrasted and around $60,000 for nondefaulters.

Ironicly, those with the littlest credit adjusts are most likely to be not able pay their obligation.

Nearly 1 out of 3 individuals who owe under $5,000 for their education default inside four years, compared with just 15 percent of borrowers who owed more than $35,000, the Urban Institute found.

The impact of default

When peoples student loans fall into default, they will see their FICO score tank around 60 points, to a average of around 550, which is viewed as “exceptionally poor,” by rating organization Experian. Borrowers who remain current, then again, have scores on average up in the 600s.

A low FICO score can drive individuals to pay higher interest rates, postpone purchasing a house and even worry over being overlooked from specific employments.

The legislature additionally has exceptional gathering powers with Federal Loans, since they’re one of the main obligations unfit to be released in chapter 11.

“Negative impacts of understudy student loans can be wage garnishments, tax offsets, and different strategies of loan collections,” said Elaine Griffin Rubin, senior contributor and communication specialist at Edvisors. “In addition, a few states suspend or revoke state-issued proficient licenses, and a few states suspend a driver’s permit due to a defaulted advance.”

To make matters worse, defaulting on your educational debts also increases the balance, likely due to to collection fees and the accumulation of interest. After default, the Urban Institute found, an student loan borrower will see their balance expand by around 10 percent.

These myriad consequences that come with a default can be hard to recover from, Kantrowitz said.

“Best case scenario, it defers interest in the American Dream,” he said. “Even under the least favorable conditions, they are closed out for all time.”

Posted in Debt, Student Loans |

Debt Settlement Downfalls

Debt settlement is a legitimate way to handle some circumstances. The industry however, has been hindered by scam companies and compromised by pop up shops and underqualified companies. These companies prey on consumers that are in desperate need and willing to get out of debt as quick as they can.
The wonderful thing about debt settlement and negotiation is now the creditors and collectors have become more accommodating and understanding of these kinds of situations. The key factor in this process for a consumer to note is how important it is to find a trustworthy and legitimate company to work with.

What is debt settlement?

Settling a debt means that the creditor and the debtor are mutually agreeing on a sum that is less than the original amount owed. Most often, only unsecured debt will be settled i.e. medical bills and credit cards. What many consumers do not know is more often than not, these companies will allow the consumer to negotiate on their own. For more information on how to settle your debt, please visit the blog here.
The process-
With a debt settlement company, you are basically paying them as the middle man, to negotiate and handle the debts for you. The payments are made very low and makes this option for many consumers seem more appealing.
Do not make the mistake of letting other cards or bills fall behind while working with a debt settlement company. The downfall on the debt settlement is that once you quit paying the creditor and are paying for the debt settlement, the accounts start to fall late which in turn causes the creditor to write off the debt as a loss. What then happens is your debt settlement company will offer a settlement at that time. At this point, you may be set up on a repayment plan.

Is it starting to sound like a costly process yet?

After all payments are made that were agreed upon with both the settlement company and the creditor, no more payments will be needed. The most appealing part of this option for the creditors is the settled amount is greater than what they might have received by selling to a collection company.

The downside to debt settlement:

No guaranteed results- The bottom line is there is no way they can guarantee to resolve all of your debts.
Won’t prevent collection activity- You will continue to receive phone calls and could be sent to collections on accounts or even sued or garnished for the debts they try to collect on.
Following through on the agreement-Should you fall on hard times, lose a job or something worse, they are able to try and collect the full amount owed or move forward legally in an attempt to collect after you have a payment agreement you don’t commit to.
Tax Problems- The possibility of having to pay taxes on a debt that is forgiven is great. You will want to speak with a Tax Advisor on what to do next.
At this point, your main concern is most likely trying to take care of your debts to help your credit. And debt settlement is not the best option when it comes to helping your credit in a positive direction.
What happens to my credit score?
Debt settlement is actually the option that impacts your credit negatively the most. There are many other options out there that can help you out in an attempt to save your scores. Again, this is due to those delinquent accounts. Late payments on your credit score have a huge impact and will continue to tank a score. It will also take the consumer several years to work to get those to a point that they are no longer having a negative impact.
What about debt negotiation or pay to delete models?
There are many reputable companies out there that use a negotiation or pay to delete model. This option allows for a consumer to gather a sum in an attempt to pay the collector off at one time. Over time, this can potentially save the consumer more money so they are not having to pay a middle man and make a payment plan.

What does pay to delete mean?

Simply put, some companies will work with creditors that agree to accept a proposed amount and in turn will remove a certain item from the credit report. This method allows for the consumer to move through the process quickly and an immediate impact is made on the credit report reflecting the removal of the item.
In closing, the best option for a consumer is one that is both manageable and financially sound. Researching the options out there and making an educated and informed decision when involving large debts is key. Speak with a financial advisor or an attorney about your options. In attempts to save or reconcile your credit score, it is important to learn how each forum can impact the credit score.

Posted in Debt, Debt Consolidation, Money, Uncategorized | Tagged , |

Decoding Millennials’ Financial Preferences and Behaviors

Millennials and Generation X control more than half of overall buying power in the United States. However Millennials and Gen Xers exhibit vastly different preferences for credit products.  

Lenders must understand these differences in order to acquire engage and retain millennial customers. Difference number one millennials carry to fewer credit cards than Gen Xers did when they were the same age. Due to the increased use of debit cards the ease of online loan origination and the CARD Act of 2009 credit cards simply aren’t as popular with millennials. Difference number two millennials are opening half as many mortgages as Gen Xers did. This downtick has driven by lower income levels and stricter underwriting post recession. Still 75 percent of millennials do plan to purchase a home in the future.

Difference number three Millennials are opening 20 percent more auto loans and 100 percent more personal loans than Generation X. Digitization has allowed for tech savvy millennials to shop around for vehicles take advantage of low interest rates and seek out fintech for attractive personal loan offers.


Posted in Building Credit, Credit Cards |

Teachable money moments for your child

Most kids start learning about money earlier than a lot of people think and it’s usually from watching their parents. Your everyday decisions about what to buy and how to save can be teachable moments. It’s positive to create opportunities to talk to kids about money, so they learn good spending and saving habits early. In this blog we’ll teach you a few different ways you can talk to your kids about money in everyday situations.

A child in elementary school is just learning how money works. So simple lessons are best for example an ordinary trip to the grocery store can be an opportunity to play a money saving game. When your child picks an item from your shopping list, have them find the sticker price and compare it with other brands with the goal of finding the lowest price.  As he or she gets older, you can teach him or her to compare unit prices to figure out when buying larger quantities can help you save money. You can also give your child a mission to find coupons for the things on your list. As a reward you can let him or her keep some of the money that helps you save. By making the weekly shopping into a quest to get the most for your money, you are teaching your child the habit of thinking about the price of an item and its value before you buy it. Plus – it’s a great way to keep him or her entertained while you shop. The next time you’re at the toy store could be an opportunity to teach your child to make choices within her budget.      

At first your child might want to take the whole store home with you.  If you give your child a defined amount of money, he or she can figure out how to narrow down their options based on how much they actually have to spend and they’ll learn how to consider tradeoffs like whether it’s worth it to get one big toy or if they’d be happier with a few smaller ones. Now when your child steps up to the register with their toy they might notice that the total cost is a little bit more than the price tag due to adding sales tax. Understanding taxes might be a challenge for a young child but as they get older, you can look at their receipt together and show your child how taxes are calculated. You can point out the things in everyday life the taxes pay for, like schools and roads. Middle schoolers can already be more sophisticated consumers, which may mean it’s a good time to reinforce basic money habits and teach them about other things like digital spending. So for example one night while you’re having dinner you could talk about the tradeoffs between eating out and eating at home. Eating out might be more convenient and fun, but making a habit of it is bound to get expensive. Have your child estimate the cost of a dinner at their favorite restaurant including tax and tip and help them estimate the cost of one of their favorite home cooked meals. The cost of the groceries and the time it takes to prepare the food and clean up afterwards teaches your child that he can save money by doing things themselves. It can also help them understand the value of his time and effort.

Playing a game with your child on a smartphone or tablet could be a good time to talk about how digital spending costs real money. They might not realize that those apps, ringtones and 99 cent power ups that you buy in a game add up over time. They might want to set some ground rules including having them ask permission before downloading anything or having them keep track of what they spend online and setting limits. The next time a child asks to buy a movie or a video game can be a good time to talk about buying versus renting. Ask your child if they will really watch that movie or play the game more than once. If not renting it could save them quite a bit or if your child wants a video game, have them consider renting it first to make sure it’s something they really want. In high school your teenager will be much more independent and have more experience with money, but there are also more spending temptations for teens. The next time you’re shopping for clothes with your teen, remind them to prioritize what they really need, over what they really want. If they spent all their money on a few trendy dresses when what they really needed was a new jacket, they might regret it when winter comes. You can also teach your teen to keep an eye out for sales and discounts by doing a little online research. They may find that they can get something they saw in a store for less somewhere else. When you’re paying the phone bill, sit down with your teen and go over how your family’s cell phone and data plan works.

If your teen pays a fee each time they send a text to a friend, show them how these fees add up over a month can be a surprise. Looking at the bill with your teenager, can help them get in the habit of carefully looking over each bill they receive to make sure there aren’t any unusual charges. This could also be an opportunity to collaborate with them and researching alternate plans that may be less expensive for your family. Beyond learning good money habits for everyday situations, it’s also important to teach your teen about saving for bigger expenses which can benefit her future like a college education. The next time the subject of college comes up, like when you’re watching a college football game with your team or talking about their favorite subject in school, it could be a good time for a discussion about how much going to college could cost and what you can afford to contribute. Setting these expectations early can help your teen prepare for their future and encourage them to find ways to help pay some of their expenses. These are just a few examples of everyday opportunities to talk to your child about money. Once you get in the habit, it’s easy to find teachable moments like these. The earlier you start the sooner you can set the foundation for the money habits they will have in the future.



Posted in Finance, Money |

What a credit repair company does for you.

There is a lot of criticism when it comes to credit repair companies. Some will say that there is nothing a credit repair company can do for you that you cannot do yourself. The FTC website even states that “anything a credit repair company can do legally, you can do for yourself at little or no cost”.

So here is the truth about this criticism. The truth is they are 100% correct. There is nothing Credit Law Center or any other credit repair company can do for you that, given experience and study, you could not do for yourself. Of course, the same could be said of many of the services people already pay for.

You can change your car’s oil, rotate the tires, change the spark plugs, or even rebuild the engine. People do so every day and while there are laws dictating some parts of the process (you must dispose of waste in an appropriate manner), there are no regulations stating that you have to pay a mechanic to do these things for you.

But while many people will take the time to learn the basic steps to maintaining their vehicle, there is little concern that mechanics will be running out of work anytime soon. For most people, it is simply not worth it to learn how to repair their own cars and then take the time to do so. It is a better use of resources to pay someone who already has the knowledge, experience, and tools to do the job for them.

It is clear that, although mechanics do not do anything for you cannot do yourself, they are still a highly valuable service. The same can be said for a barber shop or beauty salon service that does something as simple as cutting your hair, the tax accountant who charges to prepare your statements, and even the supermarket you purchase cheese from instead of milking your own cow. And the same can be said for credit repair companies like Credit Law Center that help consumers who do not have the time or desire to take on the task themselves.



Posted in Credit Repair, Credit Tips |

The Truth About Monthly Credit Repair Programs

Real or Fake

Real or fake? Credit repair companies that over promise and under deliver!

As an everyday consumer, it is normal to look for “best in the business” for whatever your needs are. Your dog need a vet? You Google “best vet in …” You need a daycare for your kid, you ask other parents what they recommend. We all want best of the best. And our credit is no different! When searching for a company that can go into a credit report and legally remove items, you will certainly need a lawyer – the best in the biz. So, let’s talk about credit repair programs that are currently all over the TV and internet with catchy ads. Here is how you can discern between what information is real and what may be overstated. You don’t want to end up wasting your time, and more importantly, your money.

What they may over promise:

Credit repair is essentially a process that helps you remove negative items from your credit report. Seems legitimate so far. The problem is that many companies falsely advertise and give false hope to the clients on what they can achieve with the credit repair. No one can ever remove accurate and complete information from a report. What can be done is the removal of inaccurate or unverifiable information. If you have a late payment, and there is no evidence that a payment was made on time, there is no way to get that item removed. If a company is over promising on items such as this, know that they are not telling you the truth. The late may fall off over time. Do not let credit repair companies mislead you in their advertising. It is important to do your research with these companies at the very beginning. Some companies will over promise certain results and encourage you to believe that they are working diligently on your file. When in reality, they are racking up monthly fees while putting “time on the clock” for those items. And why would they work fast for you? You have already paid them to begin. Time on the clock is more money in their pocket.

How they under deliver:

Serious matters such as credit play a major role in everyone’s life. There are some companies that may even hide behind the title of a name, or claim they work as a law firm. However, they cannot work as a legitimate law firm. Again, be weary of what you are enrolling in. Many of these companies will mislead you with their fine print where it will explain they cannot remove certain items. We have seen a few companies that advertise that they have removed thousands of items from reports. But, those items were already about to fall off with time. Or, they claim to be a law firm but legally cannot take any action on behalf of the consumer. They are looking for items that will fall off soon and enroll you, drag the process out with a monthly fee and then surprise- the items are gone. These companies are under delivering by convincing you it was what work they did. Really, the item would have fallen off. But, you paid money, so of course you expect it was something related to the company you hired.

What a real law firm does:

At Credit Law Center you sign a Power of Attorney form, meaning you are now represented by an actual Law Firm. We do not charge monthly fees that go on with no results. Our clients are only charged for the successfully removal of an item. We send debt demands out on legal letterhead and demand those agencies remove items from the report. By law credit reports have to be timely, accurate and verifiable. When they are not, we use the law as leverage to have those accounts removed for our consumers. We work quickly for our clients because we are performance based. And, really, shouldn’t that be the model? You don’t pay a technician to try to patch your tire, you pay him when he does it! We have successfully sued all three agencies (Transunion, Experian, and Equifax) and recouped damages for those consumers. Whether companies have violated the FDCPA (Fair Debt Collection Practices Act) or the FCRA (Fair Credit Reporting Act), our attorneys know the law and know how to protect consumers.

It is not uncommon for new clients to inform us that they have worked with other dishonest credit repair companies. They feel as though they have thrown money away with no progress. We don’t promise removal of items off reports. But, we do promise you will only pay for results.

Take the next step with Credit Law Center

Posted in Uncategorized |