Home > Managing Debt > We Paid Off $90K of Debt in 4 Years

Comments 2 Comments

Paul and Joan Ostroff went into debt trying to give their son, Andrew, a shot at getting past a learning disability so that he might be able to go to college.

Joan, a preschool and elementary teacher, knew something wasn’t right and that their son had some learning delays. She had the public school evaluate him when he was 4 and 5, and the Ostroffs learned that he had an auditory processing disorder. However, Andrew didn’t score low enough on tests to qualify for special education services, Joan said. They decided that he needed small classes and accommodation for his learning disability — and that they would find a way to pay for the schooling that could give him the help he needed.

The first year, the tuition was $4,500, and it was close to $16,000 by the time Andrew, now 37, graduated from high school. The schools wouldn’t take credit cards for tuition, so the Ostroffs paid that out of their salaries (deposits came from Paul’s pay for summer camp for Army Reserves). Meanwhile, they put their living expenses on a credit card… and applied for more cards. By the time they went to Consumer Credit Counseling (now run in Philadelphia by Clarifi) for help in 2010, they owed $88,000 on about 20 credit cards.

Stretched to the Breaking Point

Though they had managed minimum payments for years, they couldn’t quite do it anymore — even with an annual income of about $90,000. Joan said the phone rang about every 10 minutes. “We couldn’t have anybody over . . . It was embarrassing.” Paul said letting the calls go to the answering machine was no solution either. They’d have to listen through many, many debt collector calls to find out if they had a message they needed. They felt like prisoners in their own home. “We couldn’t give them the amount they wanted,” Joan said. “It was causing depression and problems in our marriage” as both were on edge and looking for someone to blame.

Their credit counselor helped them add up all the debt. They hadn’t known the total, just that even the minimums were more than they could pay. “He had to take it home with him,” Joan recalls. But the counselor came up with a debt management plan. It involved monthly payments of $2,105, and the Ostroffs knew that two missed payments would mean they were out of the program. And, with credit scores in the 500s, the old “solution” of borrowing more was out of the question. They never missed a payment, Paul said.

Joan said they got a statement each month, and the first, listing every creditor, was four pages long. The debts were paid from highest interest rate to lowest, and they watched the statements shrink as bills were paid off.

Wrestling With Financial Priorities

They got help from their investment manager in prioritizing when unexpected expenses (like an air-conditioner replacement) came up. But the debt management plan came first. That was taken by automatic draft. With what was left, they paid utilities, condo fees and other expenses. They had savings, but they’re retired now. And so they asked their investment manager to serve as a kind of gatekeeper of their savings. “When our air conditioner needed replacing, he released money for that,” Paul said. It keeps them accountable.

Joan said that given the chance to do it again, she’d make many of the same decisions to help Andrew, who has now earned a master’s degree. The differences would be that she’d watch expenses more carefully and perhaps buy more secondhand goods to minimize the debt. They have warned their son that debt can be crippling. “We’ve told him to learn from our example,” Joan said.

After they made their final payment, Clarifi pulled their credit scores again — and saw improvement of about 100 points. Their counselor expects their scores to go up that much again in the next year. Meanwhile, they are considering some minor household repairs. They need to replace their car. The expenses that could wait were put off while they repaid debt.

For now, they are keeping the one credit card they were permitted to keep as they repaid their debt (its use was reserved for emergencies, such as a car repair). They are thinking about financing a vehicle, though their current credit scores wouldn’t get them the lowest rates. And, Paul notes, “the car still starts.”

They are fortunate in that both had pensions from their jobs (she taught in public schools, and he worked for the Department of Defense) and Paul’s military pension as well. They also get Social Security benefits. Still, paying off a year’s worth of income in four years isn’t easy. While their income is higher than most, so was their debt.

Paul has retired, but he hasn’t stopped bringing in an income. He has been a “third-base greeter” for the Philadelphia Phillies for the past three years. He scans tickets and then helps people find their seats. His pay doesn’t include a ticket — but you can bet that when he buys one, it’s in the cheap seats.

If you find yourself with so much debt that you can’t make the payments, it may be time to seek help. If you opt to go with a credit counseling agency, it’s important to find a reputable organization that does not charge high fees (here is how to do that). Maxing out your credit cards and missing payments can damage your credit score, so it’s important to work out a solution that can help you rein in the problem. You can see how your debt and payment history is affecting your credit score by using free tools from Credit.com, as well as see two free credit scores updated monthly so you can track your progress.

More on Managing Debt:

Image courtesy of the Ostroffs

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Brian Belenski

    This is why I hate to even have credit at all…. this is the Norm more that the exception these days. And there is ZERO resolution for the consumer because ALL debt is assumed to be valid

  • http://www.credit.com/ Credit.com Credit Experts

    Are you asking about debt management plans? If so, yes, they do exist. A good place to look for a reputable credit counselor is find a counselor through the National Foundation for Credit Counseling.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team