Do the right thing, but don’t let them bully you

I have a student loan in default that is now being handled by a collections agency. They want me to pay the entire $20,000 now, or consolidate it with $16,000 in collection fees added. Are these my only options?

by Dave Ramsey, Syndicated columnist | Columnist, External

Published Feb. 7, 2015, 5:00 a.m. ET

Dear Dave,

Rebecca

Dear Rebecca,

There's no way I'd consolidate and pay $16,000 in collection fees. Right now, they're trying to bully you. They may eventually garnish your paychecks, but I think you can still work out something with these guys.

You'll have to repay the loan, and probably the interest and some of the late charges, but $16,000 is a bunch of crap. Don't run out and get another loan to pay it, but don't let yourself be blackmailed, either. You've made a mess by ignoring this for so long, so now you'll have to save every penny you can and start sending them substantial amounts of money each month.

Trust me, they'll take your payments and cash the checks. Hopefully, you can settle on a reasonable repayment structure and have this thing killed off in a couple of years.

-Dave

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

I’m debt-free except for my home, and I’ll have that paid off in about 12 months. I currently make $60,000 a year and live in an area of Florida that is designated a flood plain,

because a river that empties into Tampa Bay runs behind my home. Currently, I’m paying $1,070 a month for flood insurance. My house is worth $325,000, and water has only come up into

the yard twice in over 20 years. Since I’m doing pretty well financially, do you think I need to keep my flood insurance policy?

Trudy

Dear Trudy,

From what you’ve told me about the history of your property, it sounds like your biggest concern might be if a hurricane caused a backwash in your area. Insurance is already pretty

tough in Florida when it comes to those kinds of things, but you don’t want to run the risk of your house getting mowed down and losing everything.

If I were in your shoes, I think I’d like the protection of flood insurance. What you’re paying for the policy is such a small percentage of your world, compared to the value of your

home and your income. Keep the coverage, Trudy!