Debt Management


Managing debt involves (1) making wise choices when it comes to purchasing goods and services, and in particular understanding how loan terms and interest rates  affect your bottom line, (2) knowing the consequences of not making debt payments, (3) knowing your rights when it comes to collections, and, (4) learning how to consolidate loans and have them forgiven or deferred to reduce your debt load, and how to evaluate options for credit counseling, obtaining credit scores, and dealing with credit card fraud.

The rule of thumb among counselors is that if more than 15% of your total income is used to service or pay debts (excluding mortgages) you are not leaving enough for other expenses or for savings (  So, for example, a family earning $15,000 per year spending 15% of their income on debt service would spend $2,250 per year, or $187.50 monthly on debt payments.

Debt is created by borrowing money and when the terms of loans or other agreements (e.g. leases) are not met, interest and fees can be added to the principal (or the base amount owed). It may not be practical nor desirable to eliminate debt, as borrowing allows us to obtain goods and services we could otherwise not afford to pay all at once.  However, it is better to manage debt than to drown in it, so let us offer you some lifeboats to keep you afloat.

Want to start getting a handle on your debt? Print out this short DEBT WORKSHEET to get started.

Additional Debt Information

Student Debt

Click here to access a tool provides information and advice for optimizing how you pay off your student loans based on some basic information about your situation. While we can’t give you advice for your exact situation, we hope it can point you in the right direction and help you learn about some of your options.

Personal Debt

The Fair Debt Collection Practices Act (FDCPA) is the main federal law that governs debt collection practices.

  • The FDCPA prohibits debt collection companies from using abusive, unfair or deceptive practices to collect past due debts from you.
  • The FDCPA covers the collection of consumer debt such as mortgages, credit cards, medical debts, and other debts primarily for personal, family, or household purposes. It covers personal debt, not business debt.
  • The FDCPA does not generally cover collection by the person or business from whom you first borrowed money—it covers third party debt collections (debt collection agencies and debt-buyers involved in collection) and attorneys who collect debt on behalf of their clients.
  • For a summary of this law visit
Credit Card Debt

When your monthly statement comes, there’s a great temptation to pay only the minimum. Don’t do it. Read your statement carefully for information about how long it would take to pay off your account balance if you only pay the minimum payment. It can take years, even decades, to pay it off. If possible always pay the balance in full every month or pay more than the minimum amount. Doing so will help you to establish an excellent credit rating, a score used by lenders to determine the rate you will pay on your loan. (source:

Helpful Definitions

  • Interest Rates: Interest rates are the cost of borrowing money. Interest rates are normally expressed as a % of the total amount borrowed.
  • Collections: Agencies or special departments set up to try and collect money from individuals on past due accounts.
  • Credit Counseling: A process to offer financial solutions to individuals deeply in debt. The process usually involves education, budgeting, and other tools.
  • Credit Score: A measure of credit risk determined by a formula used by credit reports. The credit score helps banks and other lenders decide whether to loan money to an individual. Credit scores range from 300 to 850 and the higher the score, the better chance of getting a loan.
  • Principal: The total amount of money borrowed (or invested), not including any interest.