Copyright 2014

Does Making Partial Payments Help?

Written by Super User

If you can't pay a bill, it might seem better to send in what you can than to send nothing at all.

That's probably a waste of money. Your creditor may cash the check, but that doesn't mean you're not considered late.

"Dont assume that any payment you make will buy you more time or prevent damage to your credit scores, NerdWallet columnist Liz Weston says. "You need to talk to the creditor. See if you can work out a payment arrangement that will keep you from being reported as late to the credit bureaus and having the account turned over to collections."

If you are considering making a partial payment:

  • Contact the creditor beforehand. Ask it to accept a partial payment without late fees, to let you skip a payment, or to change the due date. Ask if the payment youre considering will be reported as late. Find out if the creditor offers hardship programs.
  • Make arrangements to pay the shortfall. If you don't catch up, it's very likely that you'll be reported late every month that the deficiency lingers.
  • Don't delay the inevitable. If your hardship is not temporary, partial payments are not going to help. Explore debt relief options, Weston advises. "You dont want to put this off and continue to throw good money after bad."

Lastly, be strategic about your bills if you can't pay them all in full. Necessities such as rent and food and perhaps transportation are higher priority than, say, student loans or credit cards or debt collectors. (See "How to Pay Bills When You Can't Pay Your Bills.")

Here's a look at how much breathing room you have on different types of debt:

Having the College Money Talk

Written by Super User

There's a rule of thumb for that, too. The total amount of loans a student takes shouldn't exceed the salary he expects to earn annually in the early years of his career, advises Kantrowitz. According to the National Association of Colleges and Employers, the average starting salary for a person with a bachelor's degree is $50,000. But if you don't know what you want to pursue as a career, be more conservative, he advises. If you earn $50,000 after graduation and borrowed that much, expect to pay about $555 per month under the standard 10-year repayment plan, assuming a 6 percent interest rate. Annually, that's about 13 percent of your salary toward your loans.

If possible, avoid private loans. Federal loans come with consumer protections like flexible repayment plans and deferment or loan-forgiveness options if you meet certain conditions. Private loans often hook borrowers with lower current interest rates, but they come with stricter terms and fewer, if any, debt relief options if you can't afford your payments, according to the experts we spoke with.

Just Graduated? Here are 5 Tips to Kickstart Your Student Debt Management

Written by Super User

Equal Justice Works is always here to help you manage your student loan debt! Download our free student debt e-book, Take Control of Your Future, or listen in on one of our monthly student debt webinars for detailed information about income-driven repayment plans, Public Service Loan Forgiveness, and other federal student debt relief options.

Cheryl Parson: Credit solutions need careful investigation

Written by Super User

Our economy runs on credit. Credit is simply debt. The average US household with debt has nearly $16,000 in credit card debt and $131,000 of total debt. And, according to Money magazine, the average household debt has jumped 15 percent faster than income over the past dozen years.

Credit is often easy to get, and the amount owed can sneak up on the borrower. According to the financial website,, 23 percent of those with credit card debt said theyve been surprised, at least some of the time, by the amount they owe on their bill.

When consumers get in over their heads or income circumstances change, the pressure to repay debt can be overwhelming, both emotionally and financially. People desperate to get out of their circumstances often turn to debt-relief companies, hoping to solve their problems. Unfortunately for many, employing these companies not only doesnt solve the problem, but because of the cost of the plans often in the thousands of dollars things are made dramatically worse.

Basically, there are two types of debt-relief options, Debt Management Plans and Debt Settlement.

Typically, in a Debt Management Plan, a counselor tailors a plan for the consumer to pay off debt. Often creditors will reduce interest rates or waive some fees as a part of the plan. Instead of a consumer paying the creditor directly, they send a payment to the debt management company, which in turn uses the money to pay bills under the plan. If the decision is made to use a DMP, here are a few things to consider:

Use a reputable, accredited nonprofit credit counseling agency. The agency should belong to the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. The agency should also be accredited by the Council on Accreditation of Services for Families and Children or the International Organization of Standardization.

Make sure the monthly payment is made.

Get everything in writing, including the fees.

Make sure the payments are being made to creditors monthly. Confirm with the creditor that they have approved the DMP.

Of the two options, hiring a Debt Settlement company is riskier. These companies often require debtors to deposit money into a designated bank account, often for a long time, before they settle debts. They may promise a creditor will agree to a settlement. However, the creditor is under no obligation, so theres no guarantee. There can even be negative tax consequences, depending on the debtors financial condition. The IRS could rule savings obtained by the Debt Settlement service as income and therefore taxable.

If the decision is made to use a Debt Settlement company, proceed with an abundance of caution and get the following answers:

The price and terms of their service.

Check with the Better Business Bureau to see if there are complaints against the company and how the company responded.

Check to see if there are any lawsuits or government actions against the company.

How long will the negotiation process take?

How much of the outstanding debt do you have to save before the company makes an offer to your creditors on your behalf?

What are the negatives of not making direct payments to creditors?

Also, before signing with a Debt Settlement company, talk with a lawyer. It may be possible to hire an attorney for less than the cost to enlist a Debt Settlement company.

Finally, debtors should consider negotiating with creditors or debt collectors themselves to come up with a manageable payment plan. Every dollar not paid to someone else is money that could be paid to creditors.

Make sure you do your homework before signing any paperwork.

PHEAA encourages new grads to prepare for debt

Written by Super User

The Pennsylvania Higher Education Assistance Agency (PHEAA) is urging graduating college students to prepare for life after graduation by working to secure employment, developing a manageable budget, and researching available student loan repayment options while being wary of misleading or fraudulent debt relief offers.

Federal student loan borrowers can take advantage of the 6-month grace period following graduation before their monthly loan payments begin. This allows time for graduates to find employment and to choose a repayment plan that best meets their needs.

"Establishing a reasonable financial plan is one of the most important things a new graduate can do as they enter the workforce," said Representative William Adolph, PHEAA Board chairman. "Graduates should do their research and become well informed about different repayment options - such as income-driven plans - which are individually matched to a borrower's ability to make payments."

For borrowers who are unable to make their monthly payments, student loan deferment and forbearance may be available. Deferments and forbearances are periods of time during which a student's lender may temporarily suspend or reduce regular loan payments.

Borrowers should contact their loan servicer to discuss their options for relief as soon as they realize that they may have difficulty making payments. Students who do not know who services their loans should visit to identify contact information for their servicer.

"Falling behind on payments and defaulting on student loans can have serious, long-term consequences - making a bad situation worse," said Senator Wayne D. Fontana, PHEAA Board Vice Chairman. "To avoid these problems, borrowers should address repayment issues quickly by working directly with their loan servicer to identify a manageable repayment plan."

PHEAA recommends new graduates who are in their 6-month grace period:

Keep track of the date that their first student loan payment is due to avoid late fees. The six-month grace period begins when a student ceases to be enrolled on at least a half-time basis (typically less than six credits).

Consider which repayment option, including income-driven repayment plans, may best suit their situation by contacting their loan servicer. Some borrowers may qualify for federal loan forgiveness programs - explore these options.

Take advantage of an automatic direct debit plan to make federal student loan payments. They will never miss a payment and will typically qualify for a .25 percent interest rate reduction just for participating.

Limit credit card spending to avoid unmanageable or excessive debt levels.

Establish a reasonable monthly budget and stick to it.

Maintain a favorable credit score by making payments on time.

Notify their lender and loan servicer of any changes to address or phone number.

Don't panic. If they are having difficulty repaying a federal student loan, they should remember options are available for relief, such as deferment or forbearance.

Borrowers who have questions concerning their private loans should contact their financial aid administrator, lender or loan servicer. Private student loans typically have repayment and debt relief options that are different than federal student loans.

Graduates should also be wary of unsolicited offers of student loan debt relief that sounds too good to be true - such as loan consolidation, loan cancellation, loan forgiveness, or defaulted loan assistance. These companies typically charge up-front fees regardless of the borrower's actual eligibility for programs and services that are readily available for free from the federal government. Before paying for any assistance related to student loan management or debt relief, borrowers should contact the servicer of their loans to learn what options are available and receive assistance in determining which option is best for them.

PHEAA also encourages graduates to visit, their free debt management website, for information on developing a budget and student loan repayment options, including loan forgiveness programs.

For more information, students and families are encouraged to visit PHEAA on Facebook, at, where they can view videos offering advice on a variety of topics related to higher education planning and student debt management.