There’s been a lot of hullabaloo around student loan interest rates lately.

If you haven’t heard, America’s student loan debt recently topped $1 trillion. That trumps what we owe on credit cards.

OH NOOOO!

Come July 1, 2012, the government subsidized student loan interest rate is set to double from 3.4% to 6.8% on new undergraduate loans – a big jump over the 1.6% I enjoyed a few years back.

It’s not terribly difficult to pay off a small, low interest rate loan.

Even if you’re paying high finance charges on a low balance, or vice versa, you’re still in a good position to become debt free.

But when you have big obligations with big interest rates, you’re pretty much screwed.

Apparently, student borrowers are finally realizing that.

They’re gambling on a college education with borrowed money, and they’re scared of making a bad bet. Since half of the nation’s new college grads can’t find gainful employment, I can see why they might be worried.

Now we got folks demanding student loan debt forgiveness. They’re mad as hell the debt must be repaid at a totally reasonable interest rate. The pay-whatever-it-costs-to-get-a-degree guys wanna renege on their promise to the taxpayer. To that I say, “Nah, buddy.”

Here’s where I get confused.

Ten years ago, financial gurus, politicians – let’s just say EVERYBODY – was screaming, “Student loan debt is good debt!!!”

I don’t remember a single “expert” who disagreed with this position.

Heck, we should be proud student loans exceed credit card balances.

Let’s congratulate ourselves for this monumental achievement.

Bravo! Hell yeah! Let’s here it for us! *golf clap*

Both political parties are sucking up to the angry crowd of future debt dodgers. “Let’s keep the rate where it is,” they say.

Since the United States is deeply in debt, it’s natural to wonder aloud, “How in the fuck can we afford to hold interest rates where they are?!”

Who’s gonna pay for this?

Well, Democrats and Republicans have the answer. Let’s hear them out.

I’ve said it before, and I’ll say it until you tell me to find a better quote, but:

There are no solutions…there are only trade-offs. ~ Thomas Sowell

Someone has to be responsible for returning principal and interest on student loan debt. Or, at a minimum, the portion funded by taxpayers. (I couldn’t give two rat turds about repayment of private student loan debt.) Who better than the folks who borrow the money?

Being that I paid off my student loans years ago, I might be a teensy bit insensitive to people who’re crying about the pending interest rate spike. I acknowledge, yet refuse to apologize for, my indignation.

What’s your position? Do you think the government should block the interest rate increase on student loans?

As I suspected, it's not a good look.

As you may already know, I’ve been debt free since 2008. Honestly, it’s one of the best feelings in the world. After I mailed in that last payment to Sallie Mae, I didn’t want to borrow money ever again.

I despise debt so much that I don’t even want to take out a mortgage for a home purchase.

But lately, I’ve been thinking about instances in which I would borrow money if I didn’t have the resources to pay cash.

If my car broke down, I’d take the bus.

If I ran out of food, I’d apply for food stamps.

If I couldn’t afford internet service, I’d hand write blog posts and publish them at the library.

Besides horrendous events that’d demand a large sum of cash to save my life or a loved one’s life, I can’t think of any circumstances in which I’d go back into debt.

Well, there is one.

If, by a stroke of bad luck, one or both of my top, two front teeth were to go missing, chip, or die, I’m hightailing my long legs to the nearest dentist for some high end cosmetic work.

No comparison shopping. No haggling. No couponing. And I only want the best.

I’d get my tooth fixed without even blinking. Interest rate and debt freeness be damned.

Judge me if you will, but I’ll be daggum if y’all have me walking around here looking like a meth head. ‘Taint happenin’.

Do you know how mentally devastating it is for a young woman to be missing a tooth?

Maybe I could suffer through a bottom tooth that was missing or just messed up. But one of my top two?

What if I wanted to eat an apple? Or a large ginger snap? Am I to chomp down on it with the side of my mouth like a caveman? Never!

Although I, generally, don’t care what other people think of me, I wouldn’t want to be known as “That tall girl with the missing tooth.” Oh, the horror!

I know this blog post seems totally random, but I felt like I had to talk about this after my cousin’s fiancé split his tooth, a friend posted on Facebook that she dreamed an entire mouth full of her teeth fell out, and a jilted dentist pulled out all of her ex-boyfriend’s teeth. (All of which are both horrific and hilarious. Ha! )

If you are/were debt free, what events would make you go back into debt?

Many of us have encountered at least one freeloading friend or family member in our lifetimes. Some of us have unfortunately had more freeloaders to deal with in our lives than we’d like to.

The typical freeloading scenario usually starts at a bar or a restaurant when the bill arrives at the table at the end of a nice meal. Most of the guests casually lean over for their purses or into their pockets to pull out some cash or maybe a credit card, but inexplicably, one of the guests suddenly excuses himself/herself to either go to to the bathroom or to “make a quick phone call,” which seems to happen almost every time you go out with this particular person.

Sound familiar?

If you’ve never had to deal with a serial freeloader, just consider yourself fortunate. In a large group, where most parties want to pay cash, my personal preference is to collect all the cash and pay the bill with a cash back credit card to earn all those points!

Unfortunately, if everyone puts up cash to pay the bill and the freeloader doesn’t cover his portion, the rewards that you’ll earn will provide very little comfort having to offset your friend or family member’s unpaid portion of the bill.

The fact is that many people, in an effort to avoid confrontation, will just cover the freeloader’s portion of the bill. Freeloaders often take advantage and prey on that fear of confrontation.

But what if you don’t have the money, or more importantly, the desire or the willingness to continually cover the freeloaders portion of the bill? While you don’t want to offend your family member or lose a friend over a dinner bill — you also can’t afford to keep picking up their tab.

Here are five killer tips for handling your freeloading friend or family member:

1) Set the Payment Expectation Right Upfront.

The first way to neutralize a mooching friend or family member is to immediately set the expectation right upfront by saying, “I’ve got the bill tonight, it’s my treat,” or “I got the bill the last time. Tonight, it’s your turn to cover it.” This is a very effective, non-confrontational way to let him or her know who will be responsible for the entire bill or a certain portion of it.

You can also say something like; “I don’t have the cash to cover it tonight, so I’m going to have to use my credit card. Do you need to stop by the ATM or are you going to use your credit card too?” This technique is a shrewd way to let them know unequivocally that you’re not their personal banker.

2) Separate Checks Please.

One of the most effective ways to deal with freeloaders at dinner is to simply ask for separate checks from your waiter or waitress right upfront. Point out who is on your bill and who is not.

Most restaurants nowadays are completely amenable to separate checks and it also alerts the other guests that they’re responsible for their portion of the bill. If you feel uncomfortable asking for separate checks in front of your guests, you can follow your waiter or waitress to their wait station and ask for separate checks there to avoid any awkward encounters at the dinner table.

3) Getting the Cash Upfront.

The bottom line is that if you’re planning on going out yet again with your freeloading friend or family member for dinner, to see a movie or a show, you have to start letting that person know that you don’t have the money to cover both of you.

While asking for the cash upfront to cover the tickets or the bill might seem a bit awkward, you absolutely MUST talk to your mooching family member or friend upfront to find out if they are having money problems that are prohibiting them from covering their share.

This doesn’t have to be an abrupt conversation with screaming and yelling. Be sure to find out how they plan to pay for their tickets beforehand and try to get the cash upfront BEFORE you pay. Asking for the cash upfront can mitigate many of the problems that occur after the fact with problematic freeloaders.

4) Be Fair But Firm.

If this freeloading behavior has become a regular routine with this particular family member or friend, you’re going to have to put your foot down on it sooner or later. The bottom line is you’ve got to speak up, stand your ground and be firm yet fair.

Again, the conversation shouldn’t be confrontational but conversational and very matter-of-fact, allowing you to simply state the facts. For example, you might say something like “Your half of the bill is $50. Do you want to give me cash for your half and then I’ll just pay the bill with my rewards card?”

This will send a very clear, strong message that he or she will have to carry his or her own weight when paying the bill.

5) Have A Heart to Heart.

While some freeloading friends and family might be doing it knowingly, believe it or not, others may not realize that what they’re doing is creating a big problem for you.

One possibility could be that you’re always picking the restaurant or entertainment and the options that you choose are simply above and beyond their means. They might be too embarrassed or ashamed to let you know they can’t afford it so they just go along with your choice.

Whatever the case might be, it’s not your responsibility to keep carrying the load. Sit down one-on-one and very calmly tell them that it bothers you to always pick up the tab in its entirety when you’re out at restaurants, shows, or whatever your entertainment choices are.

It’s important that you avoid generalizing and be able to point to very specific incidents, times and dates of the behavior that you have an issue with. Being honest about your predicament is critical to maintain the relationship.

Let him know that you can’t afford to carry the financial load (even if you can) when you’re eating out together or entertaining, so he needs to either start paying his own way, or alternatively, choose restaurants or outings that are more affordable for him so he can more comfortably pay his own way.

Using these five tips, you can really change the dynamic of this problem and, assuming the relationship is important to you, still have a chance at keeping the relationship intact.

Most importantly, these tips will allow you to do it in a non-confrontational manner with honor, grace and dignity. If your friend or family member is reasonable, they should understand where you’re coming from. But the end of the day, there might be some people that just don’t get it or simply aren’t willing to get honest with themselves about their behavior.

Simply put, how your friend reacts to you taking charge of the situation is beyond your control. How they respond to it, favorably or not, will no longer be your problem.

This is a guest contribution from Bill Hazelton, CEO and Founder of Credit Card Assist, one of the leading pro-consumer credit card comparison sites online.

A few days ago, after listening to The Rush Limbaugh Show, a friend called me with the answer to America’s debt problem: Oil.

Apparently, we’re sitting on a lot of it. All we have to do is sell our oil and pay off our debt. Problem solved, right? Well, let’s think about this for a minute.

Someday I might be okay with America using a nonrenewable resource that’s absolutely essential for our way of life to pay down debt. But right now, the idea scares me.

Here’s my issue. The United States is a junkie.

Some say we’re addicted to oil. I say we’re addicted to debt.

As I write this, our national debt is about $15.6 trillion dollars. That’s roughly $50K for every man, woman and child living in the United States. If you were to include all debt, e.g., national debt, student loans, credit cards, mortgages, etc., the average U.S. resident is burdened with over $180K in debt. Sadly, that figure includes the children.

We have to get our income, our expenses, or both under control before we start selling off assets.

For instance, if you were to tell me you wanted to take out a home equity loan to pay off your credit card balances, I’d ask you one basic question: How’d you find yourself in credit card debt?

Were you just a spoiled brat doped up on instant gratification?

Or was an uncontrollable event, such as a medical illness, the catalyst for your financial downfall?

If you’re an undisciplined spendthrift, you’ll borrow money on your home, pay off the credit cards, and quickly find yourself back in debt.

Keep repeating the process, and you’ll eventually run out of assets. Except then, you’re bankrupt AND homeless.

You have to deal with your addiction first.

Let’s look at another example just to nail the point home.

You probably didn’t know this about me, but I’m pro-liposuction IF you’re in tippety top physical shape and you only need to remove a little fat in trouble areas.

Why?

Because if you don’t correct your eating habits and sedentary lifestyle, you’ll gain all the weight back. Not only will you have subjected your health to the risks of surgery, but you’d have paid a large sum of cash only to find yourself right back where you started.

The quick fix is rarely the way to go.

What do you think?

Would you sell assets to pay down debt without addressing the issue that led to the debt in the first place?

During my never ending quest for knowledge, I stumbled upon an audio book at my local library by Kevin Trudeau titled Debt Cures “They” Don’t Want You to Know About. The “they” Mr. Trudeau refers to is the consumer lending industry. I’m all for Americans gaining their financial independence and getting out of all kinds of debt. Unethical business practices should be exposed so that consumers are fully aware of the wealth prevention traps credit card companies set for the ignorant and uninformed.

I’ll give you an example of one such trap even I’ve fallen into. When you’re trying to get out of credit card debt, many financial experts recommend you transfer balances on higher interest credit cards to those with a lower interest rate. To me, this sounded like good advice. There was no shortage of credit card companies who were willing to offer me a 6 month introductory rate of 0%. So, I took advantage of the 0% interest rate and transferred the balance on my old credit card to the new credit card with the favorable, introductory rate.

Like an idiot, I charged additional purchases on the new credit card. Naively, I thought that my payments would be applied to the charges with the highest interest rate. Not so. I called the credit card company up to ask that my payments be applied to the highest interest rate charges first. Their answer was no – too bad.

There are numerous tactics credit card companies use to extract as many pennies out of the American consumer as legally possible. But, let’s take a moment to revisit Mr. Trudeau’s Debt Cures “They” Don’t Want You to Know About.

I’m probably not being totally fair. I’m drafting this blog entry although I haven’t finished listening to Mr. Trudeau’s 10-hour audio book. However, he brings up a lot of issues that really make my blood boil. He doesn’t adequately address the concept of personal responsibility. It seems Mr. Trudeau believes that consumers are being taken advantage of, railroaded, and raped by the consumer lending industry. According to Mr. Trudeau (and I’m paraphrasing) these poor blameless fools didn’t understand what they were getting themselves into. Late fees, over the limit fees, and default interest rates charged by the credit card companies are absurd.

Mr. Trudeau gives several examples of individuals who found themselves steeped in credit card debt after they lost their job, experienced an unexpected medical emergency, or had to pay for a car repair. I understand that it’s practically impossible to prepare for the infinite number of circumstances that could render any of us insolvent. However, there are many things within our power that we can do now that will mitigate the risk of reasonably expected and non-routine events causing us to succumb to the temptation of credit card debt.

I’ve been told that I’m cold. I’m not sure I agree with that assessment of my personality, but I don’t have a lot of patience for people who lack a sense of personal responsibility.

Mr. Trudeau gives an example of a young woman, who at the age of 21, had her car repossessed, defaulted on two loans, owned eight credit cards, and couldn’t even open a savings account because her credit was so bad. Oh, let me add that this young lady worked a part-time job making minimum wage. I don’t know this young woman’s story, but let’s just call her a deadbeat for simplicity’s sake. She sounds like a thief to me. I don’t see how someone working part-time making minimum wage could even afford a car note, let alone eight credit cards and two personal loans. Am I to assume that she was totally unaware or conveniently delusional about the fact that she’d be unable to pay back the money she borrowed? I’d suggest this young lady gets serious about honoring her obligations by securing a full-time job in addition to the part-time job she already has so that she’ll have more money to pay down her debts.

I find it interesting that Mr. Trudeau suggests that people generally use their credit cards during times of crises. He mentions a man who lost his job after the small company he worked for went under. For 4 weeks of unemployment, the man was “forced” to use his credit card to cover his car payment, rent, and food. Fortunately, the guy found a job after about a month, but he’d incurred $5,000 of credit card debt during the interim. I guess I could feel sympathy for this individual who didn’t even have enough money set aside to cover one month of living expenses when the popular recommendation is to have 3 to 6 months. I don’t.

If you’re unable to provide basic necessities to you and your family during times of hardship and credit allows you to survive, then you should pay for the privilege. I find it hard to believe that there are no other options, but IF credit is the only way, then be thankful you and your kids didn’t have to die of starvation because you didn’t have any money. Assuming credit card companies aren’t charities, there’s a cost to using their product called interest.

Now I don’t want to beat up Mr. Trudeau without offering the 6 simple solutions for outsmarting the credit card companies that I promised in the title.

1. Use cash. Included in the cash category are debit cards and checks. No one is forcing you to borrow money. Be warned that if you bounce checks or overdraw your account, the penalties can be just as cumbersome as credit card interest and fees.

2. Pay your bill on time. Have your credit card’s minimum payment automatically paid from your checking account. If paying by check, you want to be extra diligent in making sure that you mail the payment at least 10 business days in advance of the due date. Verify that the payment posts to your account on time. Credit card companies are notorious for holding checks and thereby forcing their customers to incur late fees.

3. Pay your balance off in full every month. If you don’t carry a balance, you won’t have to worry about the credit card companies arbitrarily increasing the interest rate on past purchases.

4. Don’t go over your credit limit. You have to police yourself. Don’t expect the credit card company to shut you down before you exceed your credit limit. Keep your balances to no more than 30% of your credit limit. Your wallet and FICO score will thank you.

5. Don’t buy stuff you can’t afford. The other strategies are a lot easier to follow if you abide by this golden rule.

6. Have an emergency fund. Three to six months is the conventional recommendation. Having access to your own cash can make a crisis look like a minor inconvenience.

I encourage you to search for ways to increase your income and reduce your expenses. By doing so, you’ll live within your means, save up an emergency fund, and avoid consumer debt.

Remember that the decision is yours. Make up in your mind that you’re not going to grovel at the feet of the credit card companies. Accept personal responsibility. It’s so much easier than blaming someone for a situation they have no interest or intention of helping you out of.

Originally posted May 22, 2009

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