Single mom must pay back school loans

By Dave Ramsey

Single mom must now repay student loans!

Dear Dave,

I’m a single mom with two children – seven and eight years old – and I just finished college. I’m looking at this looming $43,000 student loan that I have to start paying in the next couple of months. It’s the only debt I have. I’m trying to decide if I should go with the 30-year payment plan or the 10-year plan that would make my payments $487.00 per month. I currently make $30,000 per year, but I’m not yet working in my degree field. I live with my mother right now and I don’t own a car. I’m using hers.

I would like to buy a house, but I’ve heard on your radio show that you recommend people have a 20% down payment rather than doing FHA or other loans with little or no down payment. I also think I’m going to need to buy a car to get around.

I’m really trying to be very smart about all of this and not go backward. How do people get to the point where they’re able to really start saving their money?

Sherrie

Toledo, Oh.

Dear Sherrie,

With your current income, I don’t think the 10 year payoff plan is even workable. I recommend putting this student loan on a 30 year payoff plan. In fact, if you’re able, see if you can get a hardship deferment.

Then deal with getting a car. If I found your dream car, how much could you realistically afford to pay per month for the car? Let’s say you can afford $400. Then put away $400 per month for 10 months and pay $3,000 – $4,000 for a good used car. After that, when you get settled in and get a better paying job, you can attack that student loan more aggressively to get it paid off. Then you can work to save up money to buy a house.

You get to start saving money by not having a car payment, not taking on a house payment at this point and by getting rid of your existing student loan debt. Concentrate on those two initial steps – the car and paying off the student loan – as soon as you finish building up a $1,000 emergency fund to insure against unexpected expenses.

Dave

Customer won’t pay $12,000, what do I do?

Dear Dave,

I’ve got my own business. I’ve been very fortunate with everybody paying me mostly on time. However, I have one customer in Virginia to whom I’ve sold about $12,000 worth of product and he has not paid me yet. He had excellent references when I started doing business with him. He tells me his customers haven’t paid him, so he can’t pay me. This goes back to August of last year. I’ve called a couple of collection agencies and allowed them to go after him, but they’ve also been unsuccessful at collecting from him. Both agencies recommended I take legal action, but I’m really trying to avoid that, if at all possible. I’ve tried calling him to discuss this, but he just calls back and talks to my answering machine at night.

I really don’t want to throw good money after bad. Should I leave this on the books? How do I know if it’s worth chasing $12,000?

David

Houston, Tex

Dear David,

I would probably do a couple of things. First of all, I’d re-examine my business model. I tell my team that if we have a collections problem, it’s not a collections problem – it’s a sales problem. What I mean is that we shouldn’t have made the sale in the first place or we should have sold it under different terms. So one of the things you can learn from this experience is to ask yourself what you could do different, as a policy, to avoid this kind of situation in the future.

Secondly, I think I’d be really persistent on the telephone with this guy. You’re half-way across the United States from him, so that’s your least expensive, best option of contact. Keep at him until you get him on the phone. Once you get hold of him, let him know that you’re a small business guy just like him and ask him what he would do in your position. Explain to him that $12,000 is a lot of money to you. Ask him if he has something he can give you in trade for the debt. Is there a portion of his business, his equipment or inventory that you could take to make this right? Let him know you’ll work with him on this and you don’t want to shut him down, but if he thinks he’s just going to walk away from this and thumb his nose at you, he’s wrong.

Forget the collection agencies. You’ll never get all of your money through them. I would personally make the phone call and work a deal with this guy or make the decision, if you have the assets, to hire a skilled attorney to go take something from this customer to settle the debt. A lot of times, as you’ve said, it’s throwing good money after bad.

Dave

Disclaimer: Questioner’s identities have not been verified by Dave $ays column or this Website.

SPECIAL OFFER:

In a very special, limited-time offer for WorldNetDaily readers only, you can receive two of Dave Ramsey’s highly acclaimed, straight-talk, motivational videos in one special package, plus a free book – well over $60 worth of Dave Ramsey’s best products for less than half price! Order, or learn more about, Dave Ramsey’s Special WND ‘Financial Peace’ Package at ShopNetDaily!

Dave Ramsey

Dave Ramsey is a seven-time No. 1 national bestselling author, personal finance expert, and host of "The Dave Ramsey Show," heard by more than 16 million listeners each week. He has appeared on "Good Morning America," "CBS This Morning," the "Today" show, Fox News, CNN, Fox Business and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions. Read more of Dave Ramsey's articles here.


Commentary