3 sneaky ways debt can change how you think

3 sneaky ways debt can change how you think

For some people, debt leads to sleepless nights and anxiety about incessant collections calls. But for others, it causes quieter changes that still leave them drowning in bills without a clear way out.

Understanding the ways in which your debt can affect the way you feel, think and act may give you perspective that’ll help you conquer it. Here are three subtle ways you may be responding to being in debt.

Americans are dying with an average of $62K of debt

Americans are dying with an average of $62K of debt

You’re probably going to die with some debt to your name. Most people do.

In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.

Student loan defaults are rising faster than you think

Student loan defaults are rising faster than you think

A new analysis of federal student loans reveals that the number of people severely behind on repaying their debt has soared in the past year, painting a bleak picture of one of the largest government programs.

The Consumer Federation of America (CFA) released a study Tuesday that found that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. The consumer watchdog used the latest data from the Education Department, which manages $1.3 trillion in federal student debt owed by 42.4 million Americans.

Bankruptcy Becomes an Option for Some Borrowers Burdened by Student Loans

Bankruptcy Becomes an Option for Some Borrowers Burdened by Student Loans

Borrowers are beginning to win battles to erase some student loans in bankruptcy court, overcoming stiff obstacles that have generally blocked that path except in extreme cases of financial hardship.

Since March, several bankruptcy courts have allowed borrowers to cancel private student loans with a new legal argument that relies on vague wording about the legal definition of a student loan.

Bankruptcy law says that, without proving extreme hardship, a borrower can’t discharge a loan made for an “educational benefit.” This language has opened a window to cancel loans for students who argue their loans falls outside this category of debt. Such reasoning has been applied to loans obtained to attend schools without accreditation or to study for a bar exam.

Six Common Mistakes People Make With Their Student Loans

By: Anne Tergesen

As millennials struggle to repay record levels of student-loan debt, many are making costly mistakes that threaten to undermine their long-term financial security.

For instance, roughly one in four is behind on repayments or in default, which can result in a host of negative consequences, from damaged credit to garnished wages. Meanwhile, many others are struggling to find enough money, after making their loan payments, to save for retirement. Among 401(k) participants with student debt in plans administered by Fidelity Investments, two-thirds say they have reduced or stopped their 401(k) contributions or have taken out a 401(k) loan or hardship withdrawal.

With total college-loan debt in the U.S. more than five times what it was just 20 years ago, “the consequences of managing that debt have never been greater,” says Heather Jarvis, an attorney who teaches financial professionals about student loans.

What follows are six student-loan mistakes people commonly make and how you can avoid them.

Solomon to lead New Long Beach Democratic Committee; Zapson out

Long Beach Democrats have elected a new party chairman, but party leader Michael Zapson has resisted leaving his post and turning over campaign funds and property.

The New Long Beach Democrats Committee, which was formed in June to nominate candidates for a City Council primary, unanimously elected Long Beach attorney Rob Solomon on Thursday as the new Long Beach zone and city chairman, to represent the city in the Nassau County Democratic Party.

How student debt became a presidential campaign issue

The $1.3 trillion burden of student debt is becoming an issue in the 2016 presidential campaign as candidates court the millions of Americans grappling with the high cost of college.

Congressional Democrats are advocating for debt-free public higher education and pushing party front-runner Hillary Rodham Clinton to take up the issue in her campaign.

White House hopefuls Sen. Bernie Sanders (I-Vt.) and former Maryland governor Martin O’Malley have already backed the plan, with Sanders proposing his own federal program to make four-year public college free.

Credit-Reporting Giants Agree to Overhaul

The three biggest companies that collect and disseminate credit information on more than 200 million Americans will change the way they handle errors and list unpaid medical bills as part of the broadest industry overhaul in more than a decade.

Under an agreement announced Monday with New York state, Equifax Information Services LLC, Experian Information Solutions Inc. and TransUnion LLC will be more proactive in resolving disputes over information contained in credit reports—a process federal watchdogs and consumer advocates have long decried as being stacked against individuals.

Most changes will be implemented nationally and will kick in over the next six to 39 months.

A major overhaul is coming to the credit-reporting industry, with the three biggest players becoming more proactive in resolving consumers' disputes. WSJ's AnnaMaria Andriotis explains on MoneyBeat.

The credit-reporting firms will be required to use trained employees to review the documentation consumers submit when they believe there is an error in their files. If a creditor says its information is correct, an employee at the credit-reporting firm must still look into it and resolve the dispute.

Lenders, credit-card issuers and collection agencies report consumers’ debts, balances, late payments and other credit-related information, such as bankruptcies and foreclosures, to the three companies. The data are added to consumers’ reports and are used to calculate their credit scores.

 

These scores help lenders determine whether to approve applicants for loans and at what interest rates. Credit reports can also have far-reaching effects in other aspects of consumers’ lives, including whether they can rent an apartment, get home or car insurance, or even find a job.

The settlement comes after more than a year of talks between the companies and New York State Attorney General Eric Schneiderman. His office began investigating their practices in 2012 after receiving complaints about errors on state residents’ credit reports and the onerous process to fix them, according to a spokesman for Mr. Schneiderman. The three firms agreed to a countrywide deal to avoid creating two systems for reporting. Such nationwide deals, said the spokesman in an email, are common when individuals are affected across the country rather than in a single state.

The pact “is a good sign that the reporting agencies are finally willing to step up their game and respond to the needs of hardworking consumers and their families,” Mr. Schneiderman wrote in an email statement.

The three reporting firms referred comment to the Consumer Data Industry Association, a Washington-based trade group that represents them.

“This dialogue with a state attorney general [gave] us the chance to have a dialogue with each other and work on details on how we can proactively pursue changes to our practices,” said Stuart Pratt, president and chief executive officer of the CDIA. He added that the credit-reporting firms weren’t found in violation of any law.

The credit-reporting firms for years mostly functioned as a powerful middleman between consumers and lenders or other companies that report credit information. When consumers file a dispute, the credit-reporting firms often convert it into a three-digit code that they send to the lender. If the lender tells the credit-reporting firm that the information on the credit report is accurate the firm typically doesn’t change it, said John Ulzheimer, president of consumer education at CreditSesame.com, a credit-management site.

A report from the Consumer Financial Protection Bureau, released in 2012, found that the bureaus resolved an average of 15% of consumer disputes internally. The remaining 85% were referred to the lenders or creditors.

Unpaid medical bills—an increasingly common type of debt—will also be treated differently on credit reports. Some 43 million Americans have past-due medical debt on their credit reports, according to the CFPB. About 52% of all debt on credit reports is from medical expenses. Collection agencies typically report medical debt to the credit-reporting firms after they receive unpaid bills from hospitals, doctors and other medical professionals. While unpaid bills result from consumers not paying, they can often result when insurance companies delay payments.

Under the new agreement, the credit-reporting firms will have to wait 180 days before adding any medical-debt information to consumers’ credit reports. During that grace period, consumers will also have time to clear up discrepancies and catch up with other unpaid bills. When medical debts are paid by an insurance company, regardless of the time frame, they will have to be removed from the credit report soon after. In contrast, most delinquencies and other negative credit events stay on people’s credit reports for up to seven years.

The credit-reporting industry said it has been taking some steps to promote accuracy on its own. In 2013, the three firms began sending paperwork that consumers could mail in with their disputes to the lenders or other companies to address specific complaints, said Mr. Pratt. He added that Equifax, Experian and TransUnion are already able to accept or deny information from lenders and other companies. But the “formalization of the dialogue” is new, he said.

Credit experts say the settlement marks the biggest reform for the credit-reporting industry since 2003, when a federal law addressed how credit-reporting firms would treat disputes and required giving consumers access to their three credit reports free once every 12 months. The law, the Fair and Accurate Credit Transactions Act, accelerated the dispute process for the consumer when an error was related to fraud or identity theft.

The agreement follows several efforts to make consumers more creditworthy. Last August, Fair Isaac Corp., the firm that created the so-called FICO credit score, announced it would stop including in its newest credit-score version any record of paid or settled bills with collection agencies and would give less weight to unpaid medical bills that are with collection agencies.

The settlement also underscores the growing pressure on credit-reporting firms over the past couple of years to provide more consumer protections and better manage the accuracy of credit reports. The Consumer Financial Protection Bureau began overseeing the credit-reporting industry in 2012 and has been focusing on accuracy issues—including complaints by consumers who say it is difficult to get the errors on the credit reports corrected.

Studies have found that a large number of consumers are affected by credit-report errors. One in five consumers have an error in at least one of their three major credit reports, according to a 2013 Federal Trade Commission study mandated by Congress. Equifax, Experian and TransUnion received some eight million requests disputing information on credit reports in 2011, according to the CFPB. Errors can occur when creditors accidentally send wrong information and can also result from identity theft and fraud, such as when a thief opens a credit-card account in someone else’s name.

How Student Debt Harms the Economy

In 2010-13, the percentage of younger people owning part of a new business dropped to 3.6% from 6.1%.

By

Mitchell E. Daniels Jan. 27, 2015 6:34 p.m. ET

To the growing catalog of damage caused by the decades-long run-up in the cost of higher education, we may have to add another casualty. On top of the harm high tuition and other charges are inflicting on young people, and the way their struggles are holding back today’s economy, we must add the worry that tomorrow’s economy will suffer, too.

Ever-escalating tuitions, especially in the past dozen years, have produced an explosion of associated debt, as students and their families resorted to borrowing to cover college prices that are the only major expense item in the economy that is growing faster than health care. According to the Federal Reserve, educational debt has shot past every other category—credit cards, auto loans, refinancings—except home mortgages, reaching some $1.3 trillion this year. Analyses in The Wall Street Journal and by Experian in 2014 show that 40 million people, roughly 70% of recent graduates, are now borrowers. In the class of 2014, the average borrower left with an average load of $33,000.