Whats A Debt Management Plan
A good credit counselor will spend time reviewing your specific financial situation and then offer customized advice to help you manage your money. After that review, a counselor might recommend that you enroll in a debt management plan to help repay your unsecured debts like credit card, student loan, or medical debts.
But if a credit counselor says a debt management plan is your only option, and says that without a detailed review of your finances, find a different counselor.
If you and your counselor decide a debt management plan is best for your situation, its a good idea to check with all of your creditors. You want to be sure they offer the types of modifications and options the credit counselor describes to you.
Heres how a debt management plan generally works:
- The counselor develops a payment schedule with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees.
- You deposit money each month with the credit counseling organization.
- The counselor uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to the payment plan.
Q& A: Everything You Should Know About The Debt Ceiling
The federal debt ceiling was raised in December of 2021 by $2.5 trillion to $31.381 trillion, which is expected to last until at least July of 2023. At that point, the Treasury Department may begin using accounting tools at their disposal, called extraordinary measures, to avoid defaulting on the governments obligations. At the point of exhaustion of those measures, absent a new agreement to either raise or suspend the debt ceiling, the Treasury will be unable to continue paying the nations bills. Congress could address the debt ceiling through reconciliation, which provides for passage of legislation with a simple majority vote in the Senate.
What is the debt ceiling?
The debt ceiling is the legal limit on the total amount of federal debt the government can accrue. The limit applies to almost all federal debt, including the roughly $24.3 trillion of debt held by the public and the roughly $6.9 trillion the government owes itself as a result of borrowing from various government accounts, like the Social Security and Medicare trust funds. As a result, the debt continues to rise due to both annual budget deficits financed by borrowing from the public and from trust fund surpluses, which are invested in Treasury bills with the promise to be repaid later with interest.
What are extraordinary measures?
File A Complaint About A Debt Collector
Report any problems you have with a debt collection company to your State Attorney General’s Office, the Federal Trade Commission , and the Consumer Financial Protection Bureau . Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your state Attorney Generals office can help you find out your rights under your states law.
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What’s Your Best Personal Finance Advice For 2023
My best personal finance advice for 2023 is to create a budget and track your expenses. Additionally, it is important to save and invest for the future, take advantage of tax-advantaged accounts, and speak to a financial advisor to ensure that your financial decisions are appropriate for your individual situation.
Again, this is fairly bland and very basic — but not bad advice. It’s not best for all, though, since we’re all different, with different circumstances. Some people, for example, should spend 2023 paying off debts and building an emergency fund before saving and investing for retirement.
It was admittedly fun asking the chatbot questions and seeing what it would say. I asked it about myself: “Who is Selena Maranjian?” And I got an answer that was partially wrong: It said that I have been writing about personal finance since 1987.
“She is a longtime contributor to The Motley Fool, where she helps readers make smart decisions about their money.” That part is true — I hope! “Selena is also the author of several books on personal finance, including The Smartest Investing Book You’ll Ever Read.” I am the author of several books — but not that one.
I threw it a bit of a curveball, too, with this question:
What Can I Do If I Can’t Pay My Student Loan
If you have federal loans , the Department of Education has different programs that could help. Applying for these programs is free. Find out more about your options at the U.S. Department of Educations StudentAid.gov or by contacting your federal student loan servicer. Youll also find more about how to get out of default.
With private student loans, you typically have fewer options, especially when it comes to loan forgiveness or cancellation. To explore your options, contact your loan servicer directly. If you dont know who your private student loan servicer is, look at a recent billing statement.
You dont have to pay for help with your student loans. A company cant do anything you cant do for yourself. Student loan debt relief companies might say they will lower your monthly payment or get your loans forgiven, but they can leave you worse off.
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Is A Chatbot Your Next Personal Finance Advisor
Should you start consulting an artificial-intelligence-trained chatbot about your finances? I wouldn’t recommend it. It offered some good general advice, but without examples and details. It also wasn’t 100% trustworthy, as it got some things wrong.
Go ahead and ask it some questions for fun, and know that you’ll likely get some decent advice. But for the best results, delve into your financial condition more deeply by reading up on personal finance and investing topics and by — yes — consulting a financial advisor if you’re not sure what your best moves are.
The Motley Fool has a disclosure policy.
Sign Up For A Balance Transfer Credit Card
A second debt consolidation method involves signing up for a balance transfer credit card. With this type of credit card, consumers can get a 0% APR on balance transfers for as long as 21 months. A balance transfer fee applies, but having that entire time with zero interest makes it easy to pay down debt considerably faster. After all, every cent paid toward debt at a 0% APR goes directly to whittling down your balance.
While balance transfer credit cards can help consumers save big on interest, its important to factor in balance transfer fees. Also, remember that 0% APR offers dont last forever, and if you havent cleared your debt before your introductory offer expires, youll pay a high variable APR after your promotional period ends.
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How Is The Covid
In response to the pandemic, the federal government has spent trillions of dollars to boost the economy, including on stimulus checks for citizens and aid for businesses and state and local governments. According to the Congressional Budget Office , these measures swelled the federal deficit to $3.1 trillion in 2020, about 15 percent of GDP and the highest level since World War II. Even before the pandemic, the CBO projected that annual deficits would breach the $1 trillion mark in 2020 and remain above that level indefinitely.
More on:
Debt held by the publicthe measure of how much the government owes to outside investorswas $16.9 trillion in 2019. That was more than double the amount in 2007, an increase to almost 80 percent of GDP from 35 percent. Before accounting for spending to combat COVID-19, publicly held U.S. debt was set to nearly double to more than $29 trillion over the next decade. Now, it is about $22 trillion, and its projected to be double the size of the economy by 2051.
Inflating It Away As The Us Did After World War Ii Probably Wont Work This Time
A vintage poster urging Americans to buy war bonds displayed at the Museum of American Finance
SAN DIEGO, Calif. The United States today not only looks ill, but dead broke. To offset the pandemic-induced Great Cessation, the Federal Reserve and Congress have marshaled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup-kitchen levels.
The 2020 federal budget deficit will be around 18% of gross domestic product, and the U.S. debt-to-GDP ratio will soon hurdle over the 100% mark. Such figures have not been seen since Harry Truman sent B-29s to Japan to end World War II.
As in World War II, the United States is piling on debt to confront a whole-of-society crisis, raising the question of who will foot the bill in the long term. But, unlike the postwar era, the underlying conditions for robust economic recovery today are less than favorable, placing an even greater onus on wise policy-making.
Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy? To answer such questions, we should reflect on the lessons of WWII, which did not bankrupt the U.S., even though debt soared to 119% of GDP. By the time of the Vietnam War in the 1960s, that ratio had fallen to just above 40%.
What happened during the war
Three factors
What we should do
+0.46% , and dozens of other companies have issued 100-year debt.
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% Balance Transfer Credit Card
It might seem counterintuitive to apply for a credit card when your main goal is to get out of credit card debt, but 0% balance transfer cards can help save you money in the long run. Find a card that offers a long 0% introductory period preferably 15 to 18 months and transfer all of your outstanding credit card debt to that one account. You’ll have one simple payment each month, and you wont pay interest.
What Does The Student Loan Forgiveness Plan Provide
The administration’s debt relief program is intended to benefit the more than 45 million Americans who carry a total of $1.6 trillion in outstanding student loans. The program would forgive $10,000 in public student loans for individuals earning less than $125,000 per year, or married couples making less than $250,000 combined.
Borrowers who have federal Pell Grants would be eligible for an additional $10,000 in relief, for a total of $20,000 in student loan forgiveness.
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Which Student Loans Are Currently Paused
The moratorium on student loan payments and interest includes all federally held student loans, regardless of what company is servicing the loan. Eligible student loans include:
- Direct federal student loans
- Federal Family Education Loan program loans held by the Department of Education, aka FFEL
- Federal Perkins Loans held by the Department of Education
- Defaulted FFEL loans not held by the Department of Education
- Defaulted Health Education Assistance loans, aka HEAL
Student loans that are not eligible include:
- Nondefaulted FFEL loans not held by the Department of Education
- Federal Perkins Loans not held by the Department of Education
- Nondefaulted HEAL loans
- Private student loans
If your student loans are eligible, payments and interest were automatically paused on March 13, 2020. If you’re not sure whether your loan payments are paused or not, contact your loan servicer.
What Debt Wont Be Erased By Filing For Personal Bankruptcy
Filing for personal bankruptcy usually wont erase child support, alimony, fines, taxes, and most student loan obligations, unless you can prove undue hardship. And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually doesnt let you keep property when your creditor has a lien or financial interest in it.
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Whos Responsible For The Current National Debt
In short? Pretty much every administration.
Regardless of political affiliation, parties in power have run up the deficit through higher spending and lower revenue collection, says Brian Rehling, head of Global Fixed Income Strategy at Wells Fargo Investment Institute.
While its easy to say a particular president or presidents administration caused the federal deficit and national debt to move a certain direction, its important to note that only Congress can authorize the type of legislation with the most impact on both figures.
Heres a look at how Congress acted during four notable presidential administrations and how their actions impacted both the deficit and national debt.
Debt Grows Into The Trillions During 1980s And 1990s
At the start of the 1980s, an increase in defense spending and substantial tax cuts continued to balloon the federal debt. The national debt at the end of the Ronald Reagan era was $2.7 trillion.
The era under President Bill Clinton was marked with tax increases, reductions in defense spending and an economic boom that reduced the growth of debt, but it still reached a staggering $5.6 trillion by 2000.
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Determine How Much You Owe
Fair warning that the first, and most crucial, step towards getting a handle on your debt is likely to be the hardest one. Coming to terms with exactly how much you owe can be a hard pill to swallow, but is something you cant afford to shy away from. Were not just talking loans and credit card debt. We mean everything from child support to court fines and even collections for utilities.
Start by writing down everything about each of your debts: what you owe and to whom. Then, make a note of these important details that will come in handy when prioritizing which debt to pay off first:
- How many billing cycles youre behind on payments
- When a debt is in collections first became delinquent
- The interest rates for each debt accountmost accounts will only have one rate, but credit card accounts may have more than one if youve used balance transfers or cash advances.
Create A Budget And Cut Out Discretionary Spending
Creating a budget may sound like such a bore, but it’s one of the most important parts of building a debt paydown plan. By doing this, you can figure out a nearly exact date of when you’ll officially be debt free.
As you create a budget, do your best to cut out discretionary spending, as this particular category of spending is where budgets can get significantly dragged down. Whether it’s regular trips to your local coffee shop or shopping sprees on Amazon, cutting down on non-essential spending will allow you to redirect any cash towards your debts.
Consider using a free budgeting tool offered by Mint or Personal Capital to help you create a budget and track your spending.
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Debt Payoff In A Nutshell
Debt repayment strategies arenât necessarily one size fits all. Always do your research to understand the short- and long-term impactsâespecially as they pertain to the specific types of debt youâre looking to pay offâbefore choosing a strategy.
Itâs also helpful to know up front how much youâll pay in fees and interest, whether the interest rate is fixed or variable and whether thereâll be a balloon payment down the road.
Becoming debt free requires consistency and patience. However, making efforts to get out of debt doesnât always mean your other financial goals have to be put on hold. For more budgeting help, check out Capital Oneâs article on how to save money and still pay off debt.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.
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Which Expenses Can Be Decreased
This may mean spending less on recreation or entertainment, not eating out for lunch or dinner as often and learning how to stretch the dollars at the grocery store a little further. It can also mean filing taxes to receive assistance with premiums or government funds which are based on income levels, e.g. medical premiums, child tax credits or GST refunds.
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National Debt By President
The National Debt has always been an area of interest for the United States President George Washington appointed future President Alexander Hamilton to understand and solve the $80 million debtthat had accrued due to the Revolutionary War. Hamilton came up with the plan to pay off the debt through taxes and the creation of the national bank. Since then the United States has steadily increased its budget deficit, and the national debt has continued to rise.The first time that the national debt hit the $1 billion mark was in 1863 while the Civil War was occurring it hit the $2 billion was two years later when the civil war ended in 1865. As the country went to battle during World War I and World War II, the national debt hit the $10 billion mark and $100 billion marks respectively. By 1982 after the Vietnam War and the Cold War, the national debt hit the $1 trillion mark for the first time in history. By the 21st Century, the national debt got to $20 trillion after major events such as the War on Terror and the Great Recession. Today , the national debt stands at $30.2 trillion and public debt is roughly 100% of the country’s GDP.
