WMAR Baltimore: Borrowers having to balance paying down credit cards and student loans

MMI client Dannell Grayson paid off $18,000 of credit card debt in just two years and now feels better positioned to pay off her student loan debt. She shares her story with WMAR Baltimore.

Transcription:

Danelle Grayson knew she needed help.

"I was in a situation where I had been laid off. I knew my debt was mounting, and I wanted to, as soon as I got a job, I wanted to be able to go into a management program."

She enrolled in a debt management plan offered through non-profit credit counseling agencies that rolled her monthly payments into one with a lower interest rate.

"How much debt did you have?"

"I had almost $18,000 in debt," which she paid off in just over two years. "It was need versus want. Do I really need it, you know, or do I just really want it? And I just made that sacrifice, and simultaneously I was paying off my car. So literally, at in the same month that I paid off my debt, I paid off my car.”

"What was that like?"

"It was the best feeling ever."

And now she's in a position to pay off her student loan debt.

"And the payments are greater than they were when I was in debt, but I'm no longer in debt, so I can actually tackle those."

But that's not the case for so many others. According to Money Management International, the nonprofit counseling agency that facilitated Danelle's debt management plan.

"We're at about a 45% increase in the number of people that are reaching out for assistance with their debt, um, and then of those folks, we're seeing a 26% increase in the level of unsecured debt that they're carrying." Thomas Nitzsche, a financial educator with MMI, said more people with more debt is a concerning trend, especially now. "Obviously, this isn't great timing because interest rates are high, um, you know, inflation is still a problem, and then of course, student loans have just gone back into repayment this month.”

But student loan borrowers have a bit of leeway. “Now fortunately, they have a year to make those accommodations and get back into, get back into repayment, um, get back into good standing, um, because they won't be reported negatively to the credit bureaus for a full year."

He stresses now is the time to come up with a plan if you don't already have one, whether it's financial counseling, debt consolidation, or calling lenders to ask for a lower interest rate.

"Because on average, we're able to reduce the interest rates by about 19 percentage points, down from about 26% to about 7%."

Those higher percentage points are costing consumers billions of dollars, $105 billion last year, a new high according to the Consumer Financial Protection Bureau. Which is why Nitzsche urges consumers to think twice before charging large purchases on credit cards.

"Really think long and hard about whether that is sustainable for you and whether that's, you know, what you're willing to pay for for that money, because ultimately, you're in, you're paying multiple times over for whatever it was that you purchased on that card."

Danelle said she does that now for every purchase. She knows how easy it is to get in over your head, and she knows there's a way out.

"There is a way. It's not completely hopeless. It's not easy, but it is, there is a way to do it."

I hope you enjoyed that matter for Mallory. To watch more matter for Mallory stories, click the box in the corner and be sure to tap that circle and subscribe to WMAR2 News for quick access to great content posted every day.