Ask The Money Coach

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As you probably read in one of my previous articles on this topic, the program in which the government will pay off your federal student loans is called The Federal Student Loan Repayment Program. It’s run by the Office of Personnel Management (www.OPM.gov). Here is a direct link to more information about the program.

www.opm.gov/oca/pay/studentloan/index.asp

Fact Sheet, Q&As and Annual Report to Congress

At the website, be sure to click on the Fact Sheet and the Questions & Answers on the left side of the page for additional details. But to answer your question, in a nutshell, any participating federal agency for which you might work can help pay your student loans through this program, as long as that agency participates in this program. Each year, participating agencies report to Congress about their activities in paying off employees’ loans. The 2008 Report to Congress from the Federal Student Loan Repayment Program is the most recent report available. Here is a link to that 38-page report. www.opm.gov/oca/pay/studentloan/html/CY2008StudentLoanRepaymentReport.pdf. In it, you will find listings of every single government agency that participated in the Federal Student Loan Repayment Program for that year.

For more information about this program and about paying off student loans, be sure to read a copy of my book, Zero Debt for College Grads: From Student Loans to Financial Freedom.

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• 5 Facts You Don’t Know About Student Loans But Should (askthemoneycoach.com)
• Student loan horror stories: What’s the worst than can happen? (walletpop.com)
• Are there any personal government grants that I could apply for that will help me pay off personal debt? (askthemoneycoach.com)

The main types of programs that will help you eliminate student loan debt include:
* service-based work activities, such as becoming a police officer, firefighter or social worker
* volunteer work, such as joining VISTA or the Peace Corps
* working for the federal government and taking advantage of the Federal Student Loan Repayment Program
* working in the medical arena as a doctor, nurse or other specialist, in places where there is a critical shortage of healthcare experts
* enrolling in the armed services (i.e. Army, Navy, Air Force or Marines)
Read this post on how to pay off student loans fast, including getting help from student loan assistance programs. Also, refer to my book Zero Debt for college Grads for an extended list of specific programs to help you tackle student loan debt.

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• CNN: Got Student Debt? Give Yourself to AmeriCorps or the Peace Corps (newsbusters.org)

What debt collectors can and can’t do sometimes depends on the laws of your own state, as well as the types of debts in question. For example, debt collectors can’t legally do anything to you (such as sue you in court or get a judgment against you) once the statute of limitations has expired on a credit card debt. But with student loans, there is no statue of limitations, so bill collectors can pursue you forever over those debts. I assume your debt fits into the latter category, since you said your $750 bill was with a college.

Federal law prohibits debt collectors from charging you any thing above the amount you actually owe, unless that’s permitted by the laws of your own state or the terms of your original agreement with your creditor. You said you signed no such contract with your creditor. Double-check the fine print of any agreement or paperwork you have. There are often clauses that give creditors or bill collectors the right to impose additional “collection” costs on borrowers. The federal Fair Debt Collection Practices Act is the national law that governs bill collectors. This law is enforced by the Federal Trade Commission, so if you have any complaints about a debt collector, reach out to the FTC (www.ftc.gov).

Also, although there is no federal requirement that collection agents be licensed or registered, many states to require this. Check the laws in your state and see if they require debt collection agencies to be licensed or bonded. A good place to start is this document from the PrivacyRights.org. If your state isn’t on the list, contact your state Attorney General via the National Association of Attorneys General (www.naag.org). Ask for the collection agency to show you in writing that it’s licensed and put everything else in writing too, as opposed to just calling you on the phone and demanding payment.

Sorry to hear about your job loss and your extended period of unemployment. It’s hard to rid yourself of credit card bills when you simply don’t have any earned income coming in because your unemployment benefits, naturally, have to just pay all your current bills. You said “we” several times in your message. So I assume that you have a spouse or a significant other. Hopefully, that person is earning W-2 wages or self-employment income. Your rental home may turn out to be your saving grace. You said that the appraisals on both homes were done “years ago.” Was that two years, five years ago or something else? Whatever the case, that’s an eternity in the real estate market. So do yourself a favor and get an up-to-date market analysis of your house. You don’t have to pay for a full appraisal at this point. Just get an experienced realtor or real estate agent to check out your rental (and your home too) to tell you what the current market value is for those properties. If you do have to sell one of them shortly, at least you’ll know how much money you can expect to net. Those funds may be sufficient to pay off the credit card debt. Meantime, read this post about tips for getting out of debt and managing your finances when you’re out of work or have reduced income. And askthemoneycoach.com/2010/03/i-have-three-credit-cards-and-my-combined-monthly-payments-are-about-700-is-it-wise-to-consolidate-through-a-debt-management-agency-will-this-affect-my-credit-score/” target=”_blank”>this one too for advice about debt management plans and a referral to the National Foundation for Debt Management (www.nfdm.org). Good luck!

No, I don’t recommend taking $14,000 from your retirement accounts in order to pay off that business credit card. I would be wary of doing so for three reasons. First, you are medically retired, so you will not likely have any source of earned income for the rest of your life. Frankly, $90,000 is not a lot of retirement income to live on until death. You could live another 30 or 40 years. Also, if you sell some of those retirement assets, you’ll have to be capital gains taxes on them. Sure that’s just 15% (and possibly as low as 5% for people in the two lowest income tax brackets). But I want you to realize that your money will be taxed, meaning you may have to give over to Uncle Sam as much as $2,100 of the $14,000 you’re considering cashing in. Lastly, I’m not convinced that you can’t pay off this debt over time by making some adjustments to your budget. I know that $24,000 a year is not a lot to live on. But have you considered if you can cut any of your existing expenses (namely any luxuries you may be spending money on) and using that money instead to knock out the business credit card debt? I just don’t want you to tap into an already modest retirement nest egg and later regret not having that money to fall back on if times get even tougher or if you need the money for other purposes later in your retirement.