Millennials Crushed by Credit Card Debt Not Student Loans.
Updated: Oct 11, 2019
(Finding What Works)
Escaping the clutches of the predatory lenders who knowingly set you up with high-interest rates is a messy business. The majority of the programs available are not very useful. The so-called experts not very honest, and the tips and quips for becoming debt-free are as thin as the paper they are written on.
There is no easy way of getting out of credit card debt. However, some options are much better than others. Debt Validation is a highly effective program that when properly utilized, will resolve most unsecured debt issues. You may not be able to get out of debt fast, but you can learn what consumer rights are available for your protection. Let's start with the numbers.
The Problem For Millennials
(Too Much Credit Card Debt)
The economy is at a record 50-year low 3.7% unemployment rate. Interest rates are falling, and millennials are still racking up mountains of debt. The average Millenial has $27,900 in personal debt, according to Northwestern Mutual's 2019 planning & Progress Study.
Source - Unemployment: bureau of labor statistics (2019).
The desire to live the American Dream and keep up with the "Joneses'" has led many consumers into a financial trap. For the largest growing segment of our society, Millennials (ages 22-37), the average paycheck has the same purchasing power it did 40 years ago.
Source: Pew Research Center.
(How To Get Out Of Student Loan Debt Without Paying)
Many Millenials are trying to figure out how to get out of student loan debt. The rising cost of tuition has forced students to take federal student loans, a Perkins loan, or a private student loan. Too much debt has become an unrelenting and cruel albatross for the young American.
Many former students are optimistic that the government will intervene and expand its public service loan forgiveness, P.S.L.F. into other types of professions. However, the government isn't into the loan forgiveness business. Currently, only 1% of student loan borrowers meet the rigorous criteria for federal loan forgiveness programs.
Private student loan servicers such as discover or well Fargo have no obligation to forgive any student loan payments or even negotiate the repayment period. However, it is always best to try and inquire if your lender will work with you.
The idea of a student loan repayment of $300-2000 a month in addition to their rent and living expenses is unmanageable for most young people just starting in life. Sadly, student loan debt has doubled from 1998 to 2016.
Source: Pew Research Center.
The median amount of student loan debt Millennials carried was $19,000 Vs. $12,800 for the previous Gen Xers' generation. This is not a good trend and will end badly without finding the best options for getting out of debt.
The Best Solution
From my 25 years of experience in the financial and the debt relief industry, the best way to get out of unsecured debt obligations is through a sound comprehensive strategy. I use whatever legal means necessary to attack the principal on your alleged debts. I prefer the acronym A.C.T., which stands for, advocate for a comprehensive strategy within a reasonable time.
A strategic default is where we utilize federal law to dispute the information purchased by a third party debt buyer or collection agent. This is a pro-active and highly effective way of becoming debt-free in under four years.
In 1978 debt validation laws were enacted under the fair debt collection practices act, F.D.C.P.A. These very powerful American consumer rights when adequately executed are more effective than any other debt relief product available in the industry.
Other Debt Relief Programs
There are several debt relief programs available to the consumer, debt settlement, debt consolidation, debt management, and some even consider bankruptcy an option. I find on close inspection, most of these programs are non-effective or negligible at best. If your goal is to get out of debt A.S.A.P., these options are not the solution. The best choice for paying off your credit or private student loans is a strategic default through a comprehensive debt validation program.
Debt Settlement companies are a big player in the debt relief industry. However, most "experts" rank them at the bottom of their list of solutions. After fees, you typically will pay around .80 cents on the dollar-based on your total debt. Twice as much as the more comprehensive and effective debt validation program.
At best, when executed correctly, a debt settlement company such as National Debt Relief will offer to negotiate a settlement with your lenders, assuming the debt is unsecured. If you are currently up to date on your payments, they will expect you to discontinue making payments.
The goal is to allow your debts to go delinquent so that they are sent to a third-party debt collector. This will enable more negotiating power as the debt buyer will have, on average, purchased your debts for 5-10 cents on the dollar.
The debt settlement company then can try to negotiate and possibly settle your debts for 50 cents on the dollar, typically what the salesperson says will be the goal. There is no guarantee of any settlement or any specific amount, and here lies what I consider the biggest problem with debt settlement.
Finding a company or advocate who will be honest, ethical, and fight for you can be extremely difficult. However, this is very important if you are going to be paying a company hundreds if not thousands of dollars a month to negotiate a settlement of your debts.
You are putting all your unsecured debts into one payment. Usually, with credit cards, but other obligations may be eligible as well. The goal of debt consolidation is to simplify your monthly payments and potentially lower your interest rates.
Getting a consolidation loan with a high debt to credit ratio can be problematic. The ideal loan would come from a bank with a low-interest rate (A.P.R.) and some small additional fees. However, most people will have credit scores that disqualify them from these sought after low-interest loans.
Therefore when you do receive offers they will be much higher and the fees more substantial. The finance company may offer lower monthly payments, but this is usually at the cost of additional payments over an extended-term.
You will probably be paying more or close to the same amount as if you had done nothing at all. I believe debt consolidation is not a good option for most situations. It is just an extension of the problem and doesn't attack the principal.
Debt Management program
Similar to debt consolidation except you pay the Company a monthly fee and they pay your creditors. The Company you hire will try and negotiate a deal with your lenders, although there is no guarantee they can get a lower rate. The programs will typically last 3-5 years. Also, your accounts may be closed.
Taking into account the fees, you are paying the debt management company. The uncertainty about negotiating a lower interest rate and possible closing your accounts, I see no real benefit with these programs.
The "Nuclear Option" is not what I consider a sound business strategy. Not only will it be on your credit for 7-10 years but also your public record for 20. The "experts" don't seem very bothered by this, probably because bankruptcy attorneys and bankers are cut from the same cloth.
I find it odd that I rarely hear mention of the Bankruptcy laws being changed in 2005. Making it substantially more challenging to file chapter 7. Today a judge can determine based on your income and assets whether or not you qualify. If they determine you don't, you will be put under a conservatorship, possible sell your assets and forced to pay back your lenders over a 5-year program.
Also, the notion that you get offered credit after bankruptcy is somehow a good thing is a stretch. What you can expect is offers like this,
Secured Credit Card $200-500 (annual $50-100.00 membership fee).
Interest rates starting around 30-300%
Late fee's $35-75.00
Over limit Fees $35-75.00
Try purchasing a home or getting into a nice apartment, good luck!!
Not A Solution But Not A Bad Idea
(The Dave Ramsey Method)
I find most experts who are selling books and seminars to be suspect, however Dave Ramsey has some good ideas on getting out of debt. His fundamental principles of attacking the debts with the highest interest rate, the "Avalanche" method is sound. Also the "snowball" method of paying off your smallest balances first makes complete sense. These ideas of taking baby steps in finding the best way to get out of credit card debt is noble.
Yet, ineffective for the average person's needs. Most people I speak with are barely making their minimum payments, if not already in delinquency. If you have the time and discipline, then this is a sound approach towards incrementally eating away at your debt. Unfortunately, what seems right in the classroom does not always work in the real world.
Get Out Of Debt Today
This list of options should have given you some guidance on what is available for resolving your debt burdens. Most programs are just not very beneficial to the needs of the average consumer. I recommend checking the get out of debt calculator if you wish to understand the negative consequences that compound interest can have over the term of your debts.
When you can realize the seriousness of the problem, the best alternative becomes clear. A structured debt validation program where within four years, your debts are eliminated. The cost approximately 40% of your total debt load. This is a sound and reasonable strategy to avoid bankruptcy, eliminate your debt burden, and rejuvenate your credit history.
All these things can be accomplished with the assistance of professionals who are willing to advocate for your financial freedom. Please contact me if you would like some further details on the program. I look forward to earning your business. Best regards,
Revolution Debt Relief LLC
752 S. Main Street
Los Angeles, California