Credit is an integral part of our financial lives. Unfortunately, for many of us, so is debt.

The University of Michigan Institute for Social Research (ISR) finds that in the United States, nearly half of all households carry more debt than they have collateral. Americans owe money on credit cards, are struggling to pay off student loans and are falling behind on mortgages. Thirty million are being pursued by collection agencies.

Credit Cards

Americans hold more than 609 million credit cards, and more than half carry credit card balances. Last year, revolving debt – 98 percent on credit cards – reached $801 billion. Those who carry this debt pay interest and often incur penalties for not paying on time or for skipping payments altogether. Engaging in these behaviors carries a hefty price tag. Interest rates are typically between ten and 30 percent APR, and penalty fees annually top $20 billion.

Get out of credit card debt:

• Include debt payment in your budget.
• Pay all your bills on time to avoid unnecessary added expense.
• Stop using your cards and ignore offers that come in the mail, including offers to increase your credit limit.
• Ask your creditors for help. Keep track of the names, phone numbers and email addresses of everyone you contact. Follow up with letters – keep copies – confirming payment agreements.
• For additional help, call 1-800-388-2227 for the nearest National Foundation for Credit Counseling affiliated agency.
• File for bankruptcy, but only when all else fails. A bankruptcy can remain on your credit report (and damage your credit score) for up to ten years. Furthermore, you may still be required to pay a portion of your debt.

Student Loans

Two-thirds of today’s college graduates leave their commencement ceremonies with diplomas clutched in one hand and at least $25,000 worth of debt in the other. Outstanding student loans stand at a trillion dollars. Delinquencies are not unusual. Neither is defaulting. And, unlike most consumer loans, a bankruptcy will not remove student loan obligations. Garnisheed wages, tax refunds and social security checks are fair game for lenders.

Contact your lender if you are having difficulty repaying your student loan. You may be able to:

• Request a deferment: temporarily delays repayment
• Request a forbearance: temporarily suspends or reduces payments
• Consolidate your loans: combines all loans into one with one interest rate and one monthly payment  
• Consider jobs or volunteer programs that qualify for deferment or forgiveness: certain public sector jobs and non-profit careers (such as teaching, police, public health or the military) may qualify for a federal loan cancellation

Mortgage Loans

Today’s economy has wreaked havoc with home ownership and consumer debt. Over 30 percent of homeowners are underwater, owing their lenders more than their houses are worth. In addition, seven percent of all mortgage loans are delinquent (incurring late fees), and every three months another 250,000 home owners enter foreclosure. Doing so damages their credit while reducing the property value and equity of neighboring homes.

Underwater homeowners and others experiencing financial difficulties that cause them to be late or to default on their mortgages may qualify for a loan modification. Check with your lender.

Free mortgage assistance – ignore venders that charge for their services – is available through the Making Home Affordable program (MHA):888-995-HOPE (4673) or hearing impaired: 877-304-9709 (TTY).

Help in all areas of consumer debt management is available through the federal government’s Consumer Financial Protection Bureau (CFPB):(855) 411-CFPB (2372) or Español: (855) 411-CFPB.

[Janet Lubman Rathner]