While I know that some people pursuing a career in medicine or law can have a few hundred thousand in student loan debt, I was surprised to receive this article about one doctor with $500k in student loan debt. Some people consider student loans to be “good debt” – a low fixed interest rate, a reasonable monthly payment, and the money goes towards furthering your career. However, $500k in student loan debt, even for a doctor, is out of this world. Unfortunately, it is a reality for Dr. Michelle Bisutti.

When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of loan payment deferrals that Bisutti got while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

“Maybe half of it was my fault because I didn’t look at the fine print,” Bisutti says. “But this is just outrageous now.” Source: MSN Money

What struck me about this article is that Bisutti isn’t a neurosurgeon or in a field that comes with a $400k annual salary. Instead, she is a family practitioner. According to a quick search on Salary.com, family practitioners in the Columbus region earn anywhere from $130,000/yr to $215,000/yr. While this may seem like a massive salary, this is before malpractice insurance and other fees. With a $500k+ student loan debt, Bisutti is in the for the long haul in terms of repayment.

I am not making any statements about her choice to take out loans and the fact that she let it slip, things happen to everyone however the fact that it is OK that one collection fee can be greater than some household’s annual income is absurd. This brings up a new topic – student loan reform. Right now, student loans go with many people to their graves. They are not dischargeable in a bankruptcy and so three things are certain – death, taxes, and student loan debt.

I’m interested in hearing what your thoughts are on the matter. Do you have student loan debt? Do you think student loans should be dischargeable in a bankruptcy if a consumer meets all of the other bankruptcy requirements? Is a $53,000 collection fee absolutely insane?

Related posts:

1. Three American Communities May Default on their Debt
2. Arizona Payday Loan Centers Close Their Doors

In this video you can learn more about how the Wall Street reform legislation will affect you as a consumer.

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Today I am working at avoiding one of my biggest temptations – Nordstrom’s Anniversary Sale. Yes, that’s right, I have a thing about the Anniversary Sale. Shoes and purses are my downfall and when shoes easily run $150 to $200 and a purse tops $400, the bill really adds up. If you add in the kids then I can easily drop a few thousand at this sale. For example, there is an absolutely adorable Juicy Couture jog suit that would look cute on my daughter. It is on sale for $120 for the jacket and bottoms and another $30 for the t-shirt.

My daughter is entering 1st grade so its not like she would get a multitude of years out of this $150 jog suit…but (she says in a whiney voice) it is cuuuuute. Let’s not even discuss the fact that she’s already got a Juicy Couture jog suit complete with sequined dog and Juicy logo already in her closet. It’s a size smaller, though, and so it won’t fit her this year. Again…this comes in a whiney voice.

What I’m doing her is kind of playing on myself. Does any 6 year-old need a $150 (on sale) jog suit? No. Do they have them? Yes. I know that $150 can buy an entire back to school wardrobe for any 6 year-old, including mine. So today I’m avoiding Nordstrom’s Anniversary Sale for the first time in years.

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Citizens of Arizona voted to ban the outrageous interest rates offered at Payday Loan Centers throughout their state and as of June 30, 2010 hundreds of stores have shut their doors or changed their business focus. In order to stay open as a payday loan center in Arizona, companies cannot charge more than a 36% interest rate. While 36% interest may seem exorbitant, it is nothing compared to the close to 400% that consumers were charged. In Arizona, a $17 fee on a 14-day $100 loan was not unheard of. Once the Arizona law went into effect, it became the 17th state in the union to ban the traditional payday loan centers.

Related posts:

1. $500k in Student Loan Debt
2. Reading: Broke, USA: From Pawnshops to Poverty, Inc

I just downloaded a new book on my Apple iPad and so far it is excellent and may be of interest to those trying to get out of debt, and stay there. The book is called Broke, USA: From Pawnshops to Poverty, Inc. How the Working Poor Became Big Business.

I’m only a few chapters in but the book is excellent and really gives a bit of insight into the abhorrent practices of payday loans, cash advance stores, subprime lending, tax refund advances, and other programs that take advantage of the working poor. These programs are touted as “helpful” and the owners claim that they provide a “much-needed service” to a forgotten segment of our population but unfortunately all these “helpful services” are doing is preventing this segment of the population from getting ahead.

Journalist Rivlin (Fire on the Prairie) offers a superb exposé of the poverty business—the flock of companies that cater to (and prey on) the working poor. For people living paycheck to paycheck and sometimes falling behind with rent, car payments, and grocery bills, fringe financing and the ubiquitous Rent-A-Centers, Jackson Hewitt, payday lenders, pawnshops, and check cashers—may seem like their only safety net. These businesses may tout themselves as a necessary service and force for economic development in low-income communities, but Rivlin reveals their dark underbelly: punishing rates of interest and customer service reps explicitly trained to mislead customers who appear gullible. He delves into the effect of financial deregulation on fringe financing, predatory subprime lending, and the major players in this unsavory world, including Allan Jones, a debt collector, worth $200 million, and the activists and advocates like Bill Brennan who’ve faced them down in the courts. A timely, important, and deeply disturbing look at the cycle of debt of the nation’s most vulnerable. (June)

Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

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1. Arizona Payday Loan Centers Close Their Doors

Although we’re only technically a few weeks into summer, it is almost back to school time for the kids. The kids start 1st and 4th grade on August 9 and this year, for the first time, we have decided to set a budget for our back to school shopping. Quite a bit went into this decision and so I wanted to share with you how we went about creating our back to school shopping budget.

School Supplies
The kids’ school will have a back-to-school supply list that each student needs to purchase prior to the start of the school year. This includes items like tissues, paper towels, pencils, crayons, etc. All of these supplies are pooled together and not reserved for our kids, specifically.

Unfortunately the state’s public education budget keeps getting cut and so these expenditures are a necessity. I don’t mind helping out because if we don’t buy these supplies, as parents, then teachers foot the bill. So we took this into account when setting our back-to-school shopping budget and decide to not include these items in the overall budget and instead just incorporate them into our monthly household budget. In other words, the kids won’t have their funds for clothing, shoes, etc reduced by the mandatory school supplies list.

What to Include?
Now that we’ve decided one thing that wouldn’t fall under the kids’ individual back-to-school shopping budget, we had to decide what to include. Since we live in a warm weather climate, back-to-school clothes consist primarily of shorts. Jeans or pants aren’t usually worn until late October and inevitably the kids will have outgrown whatever was purchased in July and August. So this year’s back-to-school shopping budget will include the following items:

• Shorts and skirts
• Short-sleeved shirts
• Novelty socks
• Hair accessories
• Shoes

We will have a separate clothing budget for cool weather clothing – long sleeved shirts, pants and jeans, and jackets.

Determining the Budget Amount
When determining how much you should spend on back-to-school shopping it is important to look at several things: your income, your debt load, the age of your children, etc. Our kids are young and so clothes are less expensive. Our debt load is high but our income is also high. So our basic dollar amount may be higher than some and lower than others but the percentage of our overall monthly income is low. The amount we’ve set for both kids, combined, is about 5% of our take home pay.

As is the case with everything related to budgeting and personal finance is that the personal part of the equation is huge. While the decision is personal, it is important that you research all of the factors in this article prior to setting your back-to-school shopping budget.

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Today I’m going to post our second update on our Baby Step 2 progress. We are almost 30% done with our debt snowball! We had a fantastic month thanks to a much better than expected commission check that my husband received. As the nation’s unemployment crisis continues, we count our blessings everyday that we’ve been one of the lucky families to not only remain employed through the recession but to earn raises as well.

• January 1, 2010 – $70,744.32 (I admit to having this number memorized)
• January 31, 2010 – $66,775.51 (5.7% paid off)
• February 24, 2010 – $66,173.36 (6.5% paid off – we paid cash for a $10k air conditioning unit during February)
• March 23, 2010 – $64,857.78 (8.4% paid off)
• April 30, 2010 – $61,637.78 (12.9% paid off)
• May 15, 2010 – $59,907.40 (15.3% paid off – I measured this mid-month because we broke into the $50s!)
• May 31, 2010 – $52,466.34 (25.8% paid off – we cashed in a small non-retirement mutual fund account and my husband’s commission was larger than expected)
• July 5, 2010 – $49,672.57 (29.8% paid off)

I was hoping to reach the $40k’s by July 1st and we did achieve this goal – yay! I had a slower than normal month in June and only made about $400 extra. This was my fault, though, as I didn’t take advantage of all the work that was made available. The kids had their dance recital and it was just a very chaotic month. I’m planning on capitalizing on July opportunities so that we can speed up our debt snowball again.

Related posts:

1. May 31 – Baby Step 2 Update
2. I Am Now a College Graduate

If you’re interested in watching The Dave Ramsey Show but don’t have the Fox Business Network or you’ve gone gazelle intense and cut the cable, you can catch certain episodes on Hulu. Here’s the most recent episode from May 25, 2010.

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As a member of the media, I receive hundreds of press releases each week. Today one came through that really caught my eye. The title of the email was “Non Profit Launches Contest to Pay Off Debt.” Great! Anything to help people get motivated to pay off debt is awesome. However, the contest is sponsored by the American Debt Counseling agency.

American Debt Counseling is a credit couneseling organization and not a debt settlement company but almost everything a credit counselor can do, you can do for yourself. Although I think it is great that this contest is out there I find it interesting that it is sponsored by an organization that benefits, directly, from consumers in debt.

Here’s a copy of the press release:

CONSUMERS CAN WIN $5,000 TO HELP PAY OFF CREDIT CARD DEBT

National Non-Profit Credit Counselors at American Debt Counseling Launch “Here’s Me Debt Free” Online Video Contest

SUNRISE, Fla. (June 9, 2010) – With more than 54 million US households struggling to pay off an average of $16,000 in credit card debt according to the Federal Reserve’s 2010 report on consumer credit, the non-profit credit counselors at American Debt Counseling are inspiring consumers to shed their debt and offering to jump start their efforts through the nationwide “Here’s Me Debt Free” campaign running online at americandebtcounseling.org/heresmedebtfree.

American Debt Counseling is calling on consumers in debt to submit a funny and creative video portraying how they would feel if they were suddenly debt free. Three winners will be selected. A grand prize of $5,000, a second place prize of $1,000 and a third place prize of $500 will be awarded in the form of direct payments toward winners’ existing credit card balances.

Alan Silverberg, founder and CEO of American Debt Counseling, a 501 (c) (3) not-for-profit credit counseling agency, said, “I am hopeful that our Here’s Me Debt Free campaign will inspire America’s consumers to imagine a life free from crushing credit card debt. Last year alone, our credit counselors helped clients pay off more than $37 million in credit card debt.”

Anyone 18 years or older living in the US with an excess of $500 in credit card debt is invited to use a camcorder, camera or mobile device to record and submit a video clip no longer than three minutes. Videos will be judged on originality, creativity, adherence to theme and number of page views generated.

The contest runs through 11:59 p.m. Eastern Time on July 31, 2010. Winning videos will be announced in September and available for online viewing at americandebtcounseling.org/heresmedebtfree and on the American Debt Counseling Facebook page.

So what are your thoughts on the sponsorship of this program – cleverly disguised marketing ploy or altruism?

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2. Around The Get Out of Debt Blogosphere

I saw an article on MSNBC.com that really drew my attention – 8 reasons you spend too much. Guess what was number one on the list? If you guessed using credit cards then you’re right so put away the plastic!

Multiple studies, including this 2008 study published in the Journal of Experimental Psychology, have found consumers are willing to spend more when they pay with a credit card instead of cash. “Credit cards allow consumers to focus more on what they’re getting, or buying, than what they’re losing, or spending,” explains Kit Yarrow, a professor of psychology and marketing at Golden Gate University. Credit cards “buffer the reality of spending because they leave more cash in our pockets and purses and provide a delay before payment is required.”

When you buy something with cash, you feel as if someone is trying to take something away from you – your money! If you swipe a credit card your brain doesn’t register this immediate loss of something that is yours.

So what else made the list of reasons why you spend too much money?

• Listening to music
• Buying in bulk
• Dieting
• Tracking exact costs
• Buying clearance merchandise
• Shopping without a list
• Falling for clever pricing tactics

So what’s your downfall?

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