May 062007
 
Authors: Kathleen Harward Director of Student Legal Services

One used to be able to work in the summer and earn enough to pay for next year’s college.

Not anymore.

At $5,000 for tuition and fees at the most reasonably priced college (not even talking about living expenses), it’s nearly impossible to save enough in three summer months. What’s worse, many students don’t even try. Instead, they spend their way through summer, adding to credit cards and applying for more student loans.

At Student Legal Services, we hear astonishing stories of how student loan money is spent.

“I paid off my boyfriend’s credit cards.”

“My fianc/ and I bought a bedroom suite at American Warehouse Furniture.”

“I bought plane tickets to Europe for my sweetheart and I.”

When everyone else around you is doing this, why question it?

The norm was different when I went to college. My friend Brian MacAndrew ate beans and potatoes all through college. “Cheap and filling,” he bragged. He was proud of eating for a week on less than $10. The rest of us weren’t that extreme, but my mattress did come from a friend’s barn. I sprayed it to make sure there were no bed bugs before I slept on it. I remember roping an old chair and ratty couch to the top of my tiny car to transport it from the generous giver to my apartment.

I’m not trying to glorify the old days and ratty couches. I am trying to convey my extreme concern for casual spending with seemingly no sense for the coming day when the piper must be paid.

According to an Experian analysis, college students have on average three credit cards each. Twenty-something-year-olds have an average student loan balance of over $14,000, credit card debt of over $5,000 and installment debt, like a car loan, of over $17,000. These numbers are actually low compared to what we see at SLS.

“This debt-for-diploma system is strangling our young people right when they’re starting out in life,” says Tamara Draut, author of Strapped: Why America’s 20- and 30- Somethings Can’t Get Ahead.

Wages have been stagnant for a long time – they aren’t keeping up with inflation or people’s growing debt obligations. That means you can’t expect a whopping salary to pull you out of a debt hole. Many college graduates barely keep up with interest payments and don’t make a dent in the principle.

There’s no easy solution. You can’t wipe out student loans in bankruptcy. You can’t wipe out credit card debt used to pay tuition. You can’t even file bankruptcy unless you go through credit counseling and pass a “means test.” These hoops were added to the laws in 2005 to make it harder to file for bankruptcy. The solution doesn’t lie in the future; it has to start now.

A few tips:

Don’t spend your loan money on a lover, even if he or she is your fianc/. Keep your finances separate until you’ve been married awhile. About fifty percent of marriages don’t last. There’s no requirement to join bank accounts when you join hands in marriage. (Don’t even consider it if you’re just living together.)

Love is blind. It blinds you for a long time. We see way too many students who have drained their finances and taken on heaps of debt for a lover that leaves them.

Don’t ignore your debt problems. Get counseling. The Wellness Center brings in an expert from the Northern Colorado Credit Counseling Center. Come to SLS for resources. You’ll have to change your lifestyle. You can’t spend more than you make.

Keep in close touch with your creditors. Never miss a payment without calling the creditor first, explaining the problem, and scheduling a date when you can pay – then keep your promise! Ask for your creditor’s help in setting up a special payment plan.

I can’t promise that all creditors will be understanding, but most of them would prefer to work with you than sue you on the debt and worry about collecting on the judgment from someone they know is in money trouble.

A money judgment is just a piece of paper signed by a judge that says you owe the judgment creditor. To turn it into money, the judgment creditor must go through more steps to garnish money from your employer or bank account. You can see why most creditors would rather work with you.

If your creditors have given up on you and sold their account to a collections agency, don’t ignore the notices you receive from the agency. Third party collectors have to comply with the Fair Debt Collection Practices Act (“FDCPA”). There are many things they must do, like tell you about your right to request in writing a verification of the debt. Assert this right. Make them verify the debt before proceeding.

Keep every piece of paper and make a log of every phone call from a collector. The FDCPA spells out many things collectors cannot do, like harass you. If you do get sued, you may have a basis for counterclaiming against the collector for a violation of the FDCPA, which carries a $1,000 fine. You can’t fabricate such a counterclaim, but if you legitimately have one, it may give you leverage to make a decent settlement.

By the time your debt makes it to the lawsuit stage, the total will look nothing like the amount you first borrowed. Late fees, interest, attorney’s fees and court costs can double or triple the debt you started with. Even at this desperate stage, there are things you can do.

Don’t ignore the lawsuit. If you do, default judgment will be entered against you. You must file an answer disputing the debt. This will cause the judge to set your case for a pretrial conference. At this time, the plaintiff bringing the suit against you has to produce evidence of your debt. You can only be charged interest and attorney’s fees if the original paperwork provides for it. Depending on how many times your account was sold before it was brought to court, the plaintiff might not be able to produce sufficient proof of your original debt. If the paperwork is sketchy, you certainly have more leverage to settle for a lower amount and you may even get a dismissal.

Your summer break is almost here. What are you going to do with it?

Kathleen Harward is the Director of Student Legal Services. Student Legal Services writes a column writes a column for the Collegian Occasionally. Replies and feedback can be sent to letters@collegian.com

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