It seems like everyone has at least a little debt. Not all debt is bad. However, you want to learn to manage your debts well so they don’t get overwhelming. If you are feeling overwhelmed, the FEC can help you:
- Negotiate with the people or companies you owe
- Investigate different payment plans and options for repayment
- Find additional dollars in your budget to pay debt down
- Possibly reduce interest rates and fees
- Stop harassment or unwanted contact from debt collectors
- Help you to understand how to make good debt decisions.
If you have medical debt, you aren’t alone. More than 43 million Americans currently owe money to doctors and hospitals. Here are the best strategies for dealing with it.
- Examine your bills: It’s hard to think about money when you are sick. Yet, understanding the services you receive may be key to reducing the amount of medical debt you have. If you aren’t able to do it yourself, ask your family or friends to keep track of all services you receive while under a doctor’s care. Make sure when you get your bill, all charges are accurate. Look for duplicate charges or errors. Medical bills are often filled with errors that could cost you thousands if you ignore them. Why pay more than you have to? Ask for a corrected bill.
- Know your insurance policy: If insured, most people know what their co-pay is. Maybe they know their deductible too. However, many don’t dig deep enough to totally understand their insurance policy. Knowing about your coverage may help you to make good decisions about your medical care. It may also help you identify errors on your bill if you are charged for a service that is supposed to be covered. If you have questions, call your insurance company directly to get the facts about your situation before you have a costly procedure done.
- Act quickly. The longer you wait to pay your bills, the more likely it is that you will owe more in fines. You may even go into collections, which will impact your credit score. If you can’t pay the whole bill right away, talk to the doctor’s office about what your options are.
- Negotiate. Believe it or not, medical debt is very negotiable. It is very common for medical providers to lower bills if you provide them with a good reason. For example, they may lower the bill if you pay it all upfront? They may also reduce the amount you owe if you show that you are struggling to make ends meet. It never hurts to ask for a reduced cost. Most likely they will work with you.
- Investigate charity care: If you do not have health insurance, hospitals provide “Charity Care.” Every hospital’s charity care plan is different, so it’s important to understand what the eligibility rules are, how to apply and what your rights are to receive the benefit. Charity care can be complicated, so don’t be afraid to call a Financial Empowerment Center counselor for help.
- Find a payment plan: Most healthcare providers are willing to work with you so that your debt is manageable. Many offer payment plans that allow you to pay over time with relatively low interest. Make sure that the rates and fees on the plan are low. Also, make sure you understand what happens if you can’t pay off the debt in time or if you are late.
Credit Card Debt
Credit card debt can get out of hand quickly. If you have racked up a lot of credit card debt, you may feel very overwhelmed and scared. However, there are surefire strategies for getting out of credit card debt. With time and persistence, you will get out of debt!
- Stop using the cards: Make sure you can cover your monthly expenses based on the income you are bringing in. A counselor can help you work on a budget that will allow you to live within your means without relying on borrowed money to make ends meet.
- Negotiate your rates: Call the credit card companies and see which rates you can get reduced. It never hurts to ask and often they are willing to reduce the rate by a few points.
- Get a plan: use one of the following two strategies to tackle the debt
- Pay more than the minimum: On your statement you will see how long it will take to pay off the debt and how much it will ultimately cost you. It is likely a scary number, even if you have modest debt. By putting just a few extra dollars a month towards your bill, you can cut time and cost of the debt. To understand the true cost of paying the minimum, check out this credit calculator on Bankrate.com
- Pay off high interest credit cards first. High interest rates often make small debts become large quickly. Make a list of all your credit cards and their interest rates. Then concentrate on paying off the debt with the highest interest rates first, while making the minimum payment on the other cards.ORPay off the smallest debt first. This is referred to as snowballing. Once you have paid off that debt, you can use the money you were putting towards that debt to tackle the next debt. This may not save you as much money as the interest rate strategy, but it will still clear up debt and you will feel great about having one less bill to pay.
Student Loan Debt
The average college student will graduate with about $30,000 in student loan debt. This can be a scary number when you are new to the workforce and your job prospects are limited. Here are a few things to keep in mind about student loans.
- There are many types of loans. Federal or private, subsidized or unsubsidized, FFEL or Direct? The type of loan you choose can make a big difference in your financial future and can determine what repayment options are available to you.
- There are many types of repayment options. If your current payment is too high or if you can’t afford to pay anything because of unemployment or another type of hardship, you may have options. It’s best to always stay in contact with your lender, and let them know right away if you are having trouble paying.
One important thing to note – unlike mortgage and credit card debt, student loan debt cannot be discharged in bankruptcy. So don’t ignore them, because these debts are not going away! See a Financial Empowerment Center counselor if you are having trouble paying your student loan debt.
- Even if your loan has already gone into default or your wages are being garnished, you still have options! A counselor can help you understand ways to get out of default, prevent or end wage garnishment and/or having your tax refund taken.
Student Loan Calculator
Before you sign the dotted line on that student loan agreement, look to this calculator to figure out how much you may owe.