My Biggest Financial Mistake – Student Loan Default
Posted on: April 7, 2009 by Matt
I was reading a post by Frugal Dad this morning that asks what your biggest financial mistake was. I started to think about it and my list is fairly long as I have made a lot of mistakes. A quick search through the old memory banks and I can easily think of a few highlights:
- Squandering my inheritance from my mother’s estate. I was in college and what is a poor college kid to do with $11,000 but buy beer and other stuff they do not need? I excused the spending by saying the money reminded me of my lost mother and that I needed to spend it before financial aid for next year. In retrospect – I was 18 years old and probably should not have been given the money. I had no clue on how to even manage small amounts of money – bad choices were made.
- My first car: It worked for me and the price was right but the car was in pretty poor shape. It was the last purchase I made with the money from my mother’s estate. I do still think fondly of that old heap though.
- My most recent car: I am still paying for a SUV that I financed through a now ex-girlfriend. She is nice enough to allow me to continue paying her and not find other financing so I can not complain too much but I do look forward to August when I will send in the last that I owe her.
The list goes on and on. However – I think my biggest mistake so far has to be allowing my student loans to default. Not just one or two of them but ALL OF THEM. There really was no need to get into a situation where my loans were defaulted. I could have called and arranged deferments when I was having trouble getting up and running while first out of college but I did not.
The primary reason I did not call my creditors and make arrangements: I was afraid. My grace period had just ended and I managed to miss my first payments to all my creditors. I then stopped getting the mail, opening the mail and even looking at my billing statements. I was afraid that since I could not pay I was going to be in some sort of big trouble and that people were going to yell at me or something. I really had no idea. In hindsight I know it seems silly and that I have certainly taken the more painful of the possible routes.
Making the mistake of ignoring student loans has lead me to my current situation with a large amount of student loans in collections (roughly $20,000 for one creditor) so I am still paying for my mistake. In addition I had 3 other sets of loans go into default as well. However – these other 3 sets of loans were federally backed (not private like the ones in collections) and had rehabilitation programs available. So currently the other student loans that I have are now in good standing or paid off – amazing what happens when you do not ignore your problems.
Naturally – if I could go back in time and start over again I would have called all of my creditors and been up front and honest with them. Things probably would have worked out much better. I was young and immature and made poor choices that I now get to clean up the mess from. However – if you are out there and just starting out or are now finding yourself in a similar situation due to the rough economy: Please learn your lesson from my mistakes – call your creditors and make arrangements. It may save you a lot of headaches in the long run.
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TagsBudget, Collections, Crazy, Debt, Debt Reduction, Extra Income, Family, Personal Finance, Savings, Student Loans Filed Under: Debt, Debt Reduction, Planning, Student Loans
It’s pretty admirable to get online and share this with the world.
I guess one of the beautiful facets of life is the chance for redemption, and it seems like you’re well on your way.
I imagine the financing arrangement with your ex was sort of awkward at first?
Blake – at first the financing with the ex was fine… but we were still together then. When we broke up it was a little awkward then got better, then really weird and now back to being ok. I think that having it out of my life will be even better though!
Thanks for the feedback!
I have watched my brother go through student loan default…a hard lesson learned for him as well. Thanks for sharing your mistake, we have all made some.
I consolidated them back in the 90’s and the interest rate was at a whopping 9%. But there’s nothing I could do. I have been payment on time ever since. I even added an extra payment a year. Sigh, only 7 more years to go.
I love these true confessions articles! It’s like playing truth or dare.
OK, here’s ONE of mine- When I was in college I decided I didn’t need to pay my excise tax. Back then, there were no computers (no kidding!) and so they didn’t catch up with me for about 3 years. My cars were junks, and the amounts were small, so I didn’t think it was any big deal. Then I got this notice telling me to pay up now or something bad, which I can no longer remember because I am going senile at 50, would happen.
Well, I paid it then, at least.