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Saturday, September 27, 2008

Losing Track of Student Loans Can Wreak Havoc On Your Personal Finances

While having a big family is a wonderful blessing in and of itself, it’s especially rewarding during tax season. Don’t get me wrong; I value my family infinitely more than a tax refund, but it feels good to know that my commitment to my marriage and children is recognized by our government when tax time rolls around. We had twins last year, so when my husband and I realized that we would get a Child Tax Credit for both of them, we thought that was pretty nice. After deductions, we expected a return in the thousands, so we were happy campers.

During that same time, however, we were dealing with a frustrating issue that did not put smiles on our faces at all. Somehow, when I consolidated my federal student loans, one of them was not included. I didn’t understand how it could have happened, considering how informed the consolidation company was. Loan consolidators do all of the hard work for you - they call you out of the blue, offering to make your life easier by combining your student loans with a great interest rate and anything else you need, including forbearances. As they are explaining everything to you at the speed of light, they list all of your outstanding loans and help you to understand why making one easy monthly payment would ease your anxieties about student loan debt. They’re right; it does. So, I agreed with them and consolidated my loans. They reviewed the information with me again, reading back the information on each smaller loan that would be merged together into the big loan. So, I thought everything was taken care of.

And then we found the one that got away.

Actually, the one that got away found us; once the creditor discovered I had moved and gotten married, they politely called to let me know that I owed them money for a small student loan. It took a while to figure out what happened, but when we did, my heart sank. I was so young and I took out so many small loans while I was in school that I hadn’t been keeping track of them properly. So, when the consolidators did not have their facts and figures right, I should have been able to correct them, but I wasn‘t. I ended up with a defaulted loan because it went unpaid and unnoticed for quite some time. As many young Americans know, having a student loan in default is guaranteed to bring a lot of unwanted phone calls, anxiety, and grief that we did not want. One artist was so encumbered by Sallie Mae that he wrote a song about it:



So, we did everything we had to do to bring that loan back to current status, although it didn't happen until around the time we filed our taxes for the year. Thinking that everything was settled, we filed and waited, only to learn that the creditor had not reported the updated status of the loan, so our entire federal refund would be garnished to settle the debt.

Needless to say, that knocked the wind out of my sail.

Lots of people depend on their federal tax returns each year to cover large expenses or to revive their personal finances. However, outstanding student loans, if they are not current or at least in forbearance, can cause your federal income tax refund to be garnished. Although what we lost was actually enough to pay off the debt and would release us from it, we couldn‘t help but feel blindsided. Our tax preparer told us that we could have appealed the situation, considering that the return was garnished unnecessarily. We decided to just let it go. Although we mourned the loss of our beloved tax return, debt freedom, much like family, is simply too great a commitment to take lightly.

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Friday, August 29, 2008

Applying For Unemployment Benefits Can Blow Up In Your Face

Sometimes you just don’t finish on top. The last time I worked a job was quite a few years ago, and unfortunately, I was fired. I was chronically late, and at a call center, that’s very bad. Very bad. That last time that I was late, I had a great excuse for not making it on time, but there was no room for negotiation. I had acquired too many demerits in too short a period of time, so I was let go.

The next step for me was applying for unemployment benefits. I had always been warned that getting fired from a job could disqualify one from receiving them, but my mom advised me to apply anyway. “The worst thing that could happen is that you get denied, right?”, she asked. I agreed with her sentiment and went for it. They approved me, and I was relieved. I would be getting married in less than six months, so I couldn’t afford to go from a full-time income to no income at all. I figured that since I would be moving to a new city once I got married, never to work again, I could simply receive the unemployment benefits until they ran out, and life would go on.

And that’s exactly what happened.

That is, until I received a letter from the state at my new address 150 miles away letting me know that my unemployment benefits were being disputed. I couldn’t believe it; I didn’t even know that such a thing existed. I received unemployment checks for months - why would the company dispute my eligibility after they had already paid the money? I was so young at the time that I didn’t even realize that it was my former employer footing the bill to begin with, so the entire ordeal was a whirlwind of confusion and questions. It also hurt my feelings because my former manager and boss personally signed off on the dispute. It truly was business, and nothing personal, but it sure felt personal. I couldn’t understand the fairness in being approved for unemployment benefits by the state and then being denied after the fact. If I was receiving unemployment benefits, the assumption would logically be that I do not have enough money to pay them back, or else I wouldn’t have needed them to begin with! I felt like I was being robbed at gunpoint.

And that’s almost what happened.

There was a hearing, and it did not go well. My former employer had a lawyer present - I was totally blindsided. I didn’t even know I needed legal representation, considering that the hearing was not before a judge. They ran me through the mud, my former manager speaking about me as if we never had any camaraderie at all. I was ordered to pay back every dime of a benefit that I was told legally belonged to me. However, just spending all that we had on our wedding and post-nuptial activities, we didn’t have the few thousands dollars that my former employer demanded. And so our joint state tax returns were garnished for a few years.

I later found out that I was not the only person I knew who had experienced this. Another young friend of mine found himself behind the barrel of the same gun, except General Motors was conducting the stickup that time. Who knew that just like buckshot spraying from a barrel, applying for unemployment benefits could blow up in your face?

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Monday, February 04, 2008

My Personal Economic Stimulus

With tax season here and Bush's economic stimulus check on it's way (one day), I can see myself buying lots of great things I might not otherwise purchase without a lump sum of money at my disposal.

I think we all have such daydreams -

However, when I come back to reality, I realize that such splurging would be unwise. My husband and I are going to revitalize our savings, take care of some small remaining debts, and then get some necessities for the kids. And maybe a nice meal at a swanky restaurant.

That's it.

Consumer borrowing is up, up, up, and the outlook is so bleak that the Fed is helping banks hit by the mortage lending crisis by auctioning fresh cash so that short term borrowing isn't disproportionately funded by credit card debt. Apparently, many of us are carrying even more credit card debt because home refinancing is down. Strapped for cash, people are just charging it.

However, those of us with growing families, good jobs, and businesses (home businesses, too) should do well during refund season, helping to bring balance back to our personal finances. We are going to be as responsible as we can with ours. That's an economic stimulus that will continue to pay off in the future.

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Saturday, January 19, 2008

What Will I Do With My Tax Refund Check?

So Bush is giving something back...

Approximately 1% of the Gross National Product will be distributed to middle America as an economic "shot in the arm." Refund checks for everyone; yipee! Although I know that this 'free money' won't actually make it to my doorstep until much later this year, I am already thinking about what my husband and I are going to do with it.

The responsible thing to do would be to pay down our debt with the money; we wouldn't miss it because it would not be coming out of our regular income. How simple is that? I know that most people will probably hit the malls and the car lots, which is what the government is hoping for - a jolt in consumer spending. Many will even convince themselves that they do so well paying their bills all year long that they deserve to splurge.

Maybe that's true; but is it wise?

I hope that my husband and I maintain the discipline we need to go ahead and invest that money in our freedom. It might make me feel free to go to the mall and spend $1600 on various wants and needs, but once I get home and see that unwaivering mountain of bills, the feeling will fade. Paying down or paying off a debt that we owe will be a step toward a freedom that lasts.

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