I am envious of those people who are fortunate enough to be debt free. I have a lot of debt… A LOT!!! One good thing… my debt is the kind that financial planners refer to as good debt. I have a mortgage and student loans. Although I use my credit card frequently, I pay the full balance at the end of each month. But anyway back to this good debt thing… yeah I understand the whole premise behind it… it is ok to invest in things that will appreciate over time, like homes and the benefits of a college education. But I do not care what they call it… good, bad, or cute little pookie pooh… the bill looks the same regardless. And I hate seeing those bills. Looking at the outstanding balance gives me a headache. It is too many zeros for me to count.

I’ll let ya’ll in on my personal finances. I owe Sallie Mae aka the student loan people over $41,000. I have been out of school for nearly 10 years and I owe them more now than I did when I graduated. I guess that is kind of my fault. I have not paid on the loan in over 9 years.

When I first got out of school, I made interest payments and threw maybe a dollar or two towards the principal. Then I realized I was eligible to put the loans in deferment. Therefore, I would not have to make any payments. So each year I was eligible, I requested deferment … and made no payments… Then when the loan was no longer eligible for deferment, I requested forbearance. And I left the loan in forbearance as long as I could… and just before the forbearance period ran out… I went back to college. (By the way, this was a calculated move on my part to avoid paying this bill.) Now because I am back in school, the loan is in deferment again.

What’s the difference between deferment and forbearance?

Both mean that you can forgo making loan payments for a specified period of time. But the eligibility requirements and impact on accrued interest is different.

To be eligible for a deferment you must be:

- Attending school at least part time

- Unemployed

- Experiencing economic hardship

- In a rehabilitation program

- Active military duty

Or you can be in several other situations that may affect one’s ability to repay.

If the loan is subsidized by the feds, they’ll pay the interest while it is in forbearance. But if it is an unsubsidized loan, interest will continue to accrue during the deferment period.

To be eligible for forbearance you must be:

In excessive debt

Or you can sign up voluntarily for any reason.

However, when a loan is in forbearance, the borrower is responsible for accrued interest for both subsidized and unsubsidized loans. If the borrower does not pay the interest, it is capitalized (added to the principal amount) on a quarterly basis.

So for about ten years I have been skirting around paying the bill. In that time… over $7,000 in interest has been capitalized. I guess that is a lot. But the reason I continue to push off paying this loan is because it is not a priority to me… obviously.

In 2003 I consolidated my student loans and now the interest is 4%… which is not enough for me to worry about right now. I hate seeing a $41,000 bill. But because I have the opportunity to skip payments… I do. It frees up cash… so I can use it for things that are most important to me… which is creating positive experiences for my children.