If you need to talk about your debt in a real big way, reach out to a credit counselling nonprofit! Folks want to help you. Below, this shortlist is a few hacks to put in your flotation device. If you’re drowning, wave for help.
HACK #1 Declare bankruptcy.
Guess what – there’s no shame in bankruptcy! It won’t get rid of your student debt, but it will get rid of consumer debt.
And unless you’re trying to be a CFP or CPA, or get a major loan in the next 5-7 years AND if you don’t already have assets (retirement savings, a house) it kind of doesn’t matter. Yes it’s an annoying process, but so is paying off debt. For some people, this is the best option as it opens up resources so you can attack your student debt with ferocity.
In general (and this is different for everyone), if the above applies and you have over $20k in consumer debt, think about it. If you have less, you may find it easier to debt snowball and just deal with paying it.
HACK #1.5 – Don’t Pay Because of the “Zombie debt” Exclusion After Seven years.
This is next-level hacking, and you’ll want to really think about it since it also means life with possible collections calls or letters, and having a mark on your credit report as you wait it out BUT, if you’re not trying to declare bankruptcy and have some old (4 years+) debts, it might be for you.
Consumer debt (eg cards & old bills) is unenforceable — e.g. it is not legal to collect it from you — after 7 years, so sometimes, paying old debt is not strategic. In any instance a debt over seven years old is one you should never make an agreement to pay, or even acknowledge.
Pro tip: if you do ever talk to a creditor or debt collector, speak of any debt they bring up (even if you know what it is) like a distant 3rd cousin you don’t believe you’re related to, “What is this debt you speak of? You’ll need to prove I owe it.” The onus is on them to prove you owe it, so make them get to work. Why? If you acknowledge the debt let along agree to a payment plan – even if you don’t pay – you RESET THE SEVEN YEAR CLOCK. A debt that was almost gone is now with you seven more years.
And, sometimes you’ll get calls on an old debt that’s a new company trying to collect. Remember the distant cousin rule, and for guidance
look directly to the US Federal Consumer Debt resources, of which there are many.
HACK #2 Debt snowball / pay that s*&t off!
If you’re planning to pay your debt, I want you to start today. As in, walk out of any store you’re in rn and put that money you were going to spend to the debt.
This might help you think about why I am a hardass on this: think of debt as adding interest to EVERY purchase you make that’s not paying off the debt. I pulled this off a smart subreddit (yes, I’ve become that person), so h/t: “While in debt, every purchase you make or investment will essentially be made by “borrowing” money at your highest debt rate.”
DAMMIT. It’s true.
Here’s an example. If you owe $3,000 that you’re paying 16% on, if you put $20 to buying a new thing, that’s $20 of debt that you pay interest on that you’re not paying off — and therefore paying 16% on. So you’re essentially paying 16% extra for any purchase while in this example of consumer debt.
HACK #3 Pay your credit cards off each month, but use them instead of your debit card to boost your credit score.
The success of this model hinges on you paying it off, ok!
But if you do that, and then use your credit cards instead of debit card, not only will you you not pay interest and increase your credit score, you’ll needle the banks by taking their money and giving nothing (ok, giving your spending pattern data).
So your plan is: buy things you have cash in the bank for, set credit cards to autopay in full, and call it a day.