Listen to this week’s podcast episode above or follow along with the transcript below.
About the author: Dana Miranda is a Certified Educator in Personal Finance® and founder of Healthy Rich, a platform for inclusive, budget-free financial education. She’s written about work and money for Forbes, The New York Times, CNBC, NextAdvisor, Insider, Inc. Magazine and more.
A lot of the ways we talk about debt encourage us to feel shame around the subject. But so do a lot of the ways we don’t talk about debt.
As I embark on the big, all-American debt journey of taking on my first mortgage, I’m reflecting on my experiences with debt and sort of astonished to find myself where I am.
After years of living on poverty-level income as an adult, I was resigned to being the kind of person who just wouldn’t ever get a mortgage. My history with debt is a far cry from anything experts — including me, until recently — would recommend for someone wanting to enjoy the basic wealth-building privilege of homeownership.
But I’m doing it, and my life feels pretty good these days. So I want to share my debt stories in case anyone is or has been where I am. Because I haven’t done any of the so-called right things with debt from day one.
Here I’ll share how I’ve evaded student loan payoff, what it was like to be sued for credit card debt, and how I handled a request to garnish my own wages as a business owner.
If you’re feeling any kind of shame, obligation or anxiety about your experiences with debt, let my stories show you that that’s all budget culture talking.
However you deal with debt is OK. You can’t make the wrong choice for you. Your path is yours to walk.
In that vein, there’s no advice here. These are my experiences and the choices I made for myself, and I’m sharing them to inspire you to make the choices that are right for you. There’s little chance our circumstances are exactly the same, so I don’t expect the moves I made to be the right ones for your situation, and I won’t ever claim to know what you should do next.
Student loans and no degree
Let’s start with student loans — that bewitching place where so many of us begin our lifelong journeys with debt.
I grew up in a working class family in a small town in the 90s and early aughts. My peers and I were expected to go to college after high school, and we expected to take out student loans. No one around me talked about student loans like the massive debt commitment they are. Applying was just the way you were able to pay for tuition.
So as a teenager, I borrowed tens of thousands of dollars. Original loans of around $32,000, I think. By the time I borrowed for school, I was married and didn’t report my parents’ income on my FAFSA. My minuscule resources qualified me for some subsidized loans and Pell grants, and I paid for college entirely with federal student aid — no private loans.
I walked away from college and didn’t give those loans a second thought.
I lived on a low income for years after school, trying to make my way as a freelance writer. I didn’t make a payment or hear a peep from a lender for about four years while I traveled and moved around the country.
Four years after I left school, I finally got an email from the financial aid office at the university and got on the phone with a wonderful woman there who was immensely helpful.
She explained that my loans were in default, and she explained the steps to get them in order. By this time, the debt had ballooned with interest and fees up to around $50,000.
At the financial aid woman’s suggestion, I moved my debt into a federal Debt Consolidation Loan and applied for income-driven repayment. That got my loans out of default. And while my income stayed low, my minimum monthly payments were $0 — which meant I could stay current without making a payment.
Those loans still collect interest, though. So by the time I was earning a living wage and looked at my credit report for the first time, the debt was up to around $60,000. I had to recertify my income each year for income-driven repayment, and that made my monthly payment between $150 and $300 at various points over the five years I was employed. That all kept me current — but didn’t make a dent in the loan balance.
Today, my loan balance is around $62,000. I haven’t made payments since the payment pause started in 2020.
As long as they haven’t been in default, the debt hasn’t weighed heavily on my credit score. And I know that on an income-driven repayment plan, my remaining balance will be cancelled after 20 or 25 years of on-time payments (and that includes all this time of deferment).
My student loan debt story isn’t about the triumph of paying off debt as fast as possible. That’s never been the goal for me. I want my student loan commitment to have as little impact on my monthly resources as possible, so every decision I make with this debt is toward that end.
I’m no longer burying my head in the sand about my student loans, though. I keep up with emails from my loan servicers (which, obnoxiously, have switched two or three times since I took out the loans), and I’ve saved the password to log into my account online. I recertify my income whenever I’m prompted to, and I make my minimum payments.
My student loan debt isn’t stressful, and it doesn’t keep me from experiencing the life I want. As long as that’s the case, the balance is completely irrelevant to me.
My first credit card debt
Now let’s move onto the more thrilling debt: my first credit card. I took a one-and-done approach to accumulating credit card debt. I got a card with a balance I couldn’t fathom, maxed it out and avoided applying for another card for years, assuming I wasn’t “good enough with money” to handle a credit card.
My then-husband and I got one of those mail offers for a credit card when I was around 22 years old. We were on pretty low incomes as service industry workers, but weren’t struggling to live the life we wanted as 20-somethings in a college town.
The credit card came to us with a limit of $2,000, which was well within our existing monthly spending. We used the card — maybe with a notion of building credit? I don’t remember, and I’m sure we hadn’t had a conversation or been taught about credit scores. Maybe we just liked having the card because it improved our cash flow between paychecks — a huge benefit.
But after a few months, the card issuer deemed us worthy of a higher credit limit and bumped it up to $6,000. That was not a good move.
We came into a particularly spendy period of our lives right around that time and quickly started carrying a balance on the card from month to month. We maxed out the card and soon after, we divorced. Not related.
We agreed casually to split the debt, which was in both of our names. When my next student loan refund came, I paid off my $3,000 and went forward into my new life.
He… did not pay off the rest.
This was during that same post-college period where I was moving around a lot and unknowingly elusive to debt collectors. I didn’t hear a thing about the remaining credit card debt for years. It wasn’t even on my credit report the first time I looked at it.
But then, suddenly it was.
Around six years after my divorce, a $4,000 credit card debt — bloated with interest — showed up on my credit report. Annoyed with my ex but not in communication with him, I ignored it. I was working a full-time job by that point and finally earning a stable income, but I hadn’t made debt payoff or my credit score a priority.
Until someone else made it a priority for me.
Here’s a messy detail that doesn’t often show up in celebrated debt-payoff stories: I was sued for my credit card debt.
Like I described in my article on making peace with your credit card debt, you can’t know for sure what will make it worth the resources for a debt collector to sue you. A lot of advice online suggests they don’t usually go after debts less than $5,000 — but mine was only $4,000 and some change.
I suspect the credit card debt showed up on my credit report because it had been sold to a new debt buyer. Why it happened at that time, I don’t know. Why did they deem my case worthy of a lawsuit? And why sue me but not my ex? My guess is they had some inkling of my income or at least my employment situation and took the bet that I’d be able to make the payments.
They were right. I settled with the collector and set up a payment plan.
But let me share a few details about going to court for this debt. Because some of this still irks me.
First, courts are just inconsiderate of defendants in general. You’re sent a summons that requires you to show up at the courthouse at a time they determine, and the proceedings are never running on time. I missed work to be there, showed up promptly 15 minutes before my appointment as instructed, and waited at least an hour to even be called in. It’s not OK to treat people this way, regardless of the charge they’re defending.
Second, the experience is confusing and misleading for defendants.
Many other people in court the day I was there were also responding to debt-related lawsuits, so the courthouse was rife with attorneys who represented the debt collectors. The staffer supervising and escorting us into mediation rooms repeatedly referred to those attorneys as “your lawyer” — as in “your lawyer will be ready for you in 15 minutes.”
The person I met with that day was not my lawyer. He was the opposing counsel, there to represent the interests of the debt collection agency. Defendants aren’t entitled to an attorney in civil court, but this incompetent language almost certainly made some people believe they were there to meet with someone who had their best interests in mind.
The meeting with the attorney in the mediation room perpetuated this mistake, and that was probably the attorney’s intention. In our conversation, he didn’t introduce himself as a representative for the collection agency. He talked to me as if he were counseling me in the best resolution for my problem***.*** He tried to make friendly small talk — but he was no match for my neurodivergent brain.
I went into this experience with the skepticism of a journalist. I was, fortunately, not misled by the convoluted process — just peeved.
I had the resources to commit to repayment, so I agreed to something like 18 months of payments to eliminate the debt. I didn’t fight the request the collector was making, so I don’t know what it would have looked like if I didn’t want to settle or didn’t have the resources for a payment plan.
I know creditors can win the right to garnish your wages in a lawsuit, and I’m glad it didn’t come to that. (This time. But stay with me…)
Getting a car loan by the skin of my teeth
My auto-loan experiences are fairly straightforward, though I got the first loan by the skin of my teeth. I’ve taken out loans for two cars in the past 10 years and paid them off through steady monthly payments.
The first car loan was the first time I applied for any kind of debt since maxing out my first credit card. My credit score was in the dumps, and I had very little monthly income.
But we were just at the dawn of the sub-prime auto loan, and I was buying a used car in my hometown from someone who knew someone I knew. She worked hard with the bank to secure that financing, and my partner and I are forever grateful. We needed a car to make a living, and our last one had run into the ground.
We got a seven-year loan at 11% interest — both very high numbers for an auto loan — and committed to monthly payments of $150.
I eventually got my full-time job and higher income, and we paid that loan off in five or six years and drove the car for about another year before buying the next one.
We bought our current car with financing two years ago and just paid off the loan after making double payments each month. We expect to drive this car for several more years, and we plan to save up to buy the next one in cash. Because getting any kind of loan when you’re self-employed — even with a high income — is annoying and demoralizing.
A surprise $8,000 debt
My most recent debt story is also the most bizarre I’ve experienced.
I didn’t know most of this, but here’s what happened: I left college without graduating in the spring of 2011. I left mid-semester but too late to withdraw from classes tuition-free. I’d paid for everything with student loans, so that check went to the school automatically.
Apparently, student loans don’t like to pay for classes you don’t take. They (whatever nebulous “they” or “it” is in charge of this), saw a full roster of failed grades for the semester and deduced that I’d dropped out. Nice sleuthing. So they took their money back. But I’d been enrolled in classes and still owed that tuition to the school.
I did not know about this.
Remember, I darted off after college and bounced around the country, gleefully remaining unreachable to anyone who wanted money from me. If you’re keeping track, that included my student loan servicers, the credit card debt collector and, now, my alma mater. If they sent me any letters, I was surely out of town before they arrived.
It had been 11 years since I left the University of Wisconsin hanging with that bill when someone finally reached me with a letter. The debt had been referred to the state’s Department of Revenue for collection, and it was due in full immediately.
The balance was nearly $8,000.
State-owned debt is a particularly tricky kind of debt to hold, because the government has more rights to take money from you than private lenders and creditors.
If you have delinquent credit card debt, for example, the company or debt collector has to take you to court to sue you if they want to force you into a payment plan, garnish your wages, or levy your bank account or other assets. The government can do those things without a court order that you have an opportunity to fight.
What I found infuriating about this debt were the unjust and inhumane ways they leveraged that power. They threw the book at me all at once, with not nearly enough concern for the effect their efforts could have on my personal finances.
I’ll disclose here that this, thankfully, didn’t destroy my financial circumstances. I’ll share in a second the ways they came after me, but know that I was in a fortunate financial place and able to weather the onslaught. I know this isn’t typical, and my indignation is mostly on others’ behalf rather than my own.
As you’ve probably learned, my goal with debt is always to reduce its impact on my monthly resources as much as possible. I’ll take any opportunity I can to deflect the commitment or defer payments. Here’s how I attempted to do that with this debt.
The Department of Revenue apparently has better detectives at its disposal than the University of Wisconsin, because they were able to find my current address and get me a letter about the debt. When I inquired about it and learned it’d been referred by the university, I tried to appeal to the bursar’s office and was told they sent a notice to my Berkeley, California address — where I lived for about 10 months from 2010 to 2011.
I tried to exercise my right to appeal the debt but found out I’d missed the window for that — which had opened when the university sent mail to no one in Berkeley.
So I proposed a payment plan, asking to pay $100 per month. They rejected it and said I could set up a payment plan at $500 per month. In the meantime — as I was attempting to appeal and request a payment plan — they sent a wage attachment requirement to my employer.
A wage attachment is a requirement to siphon off a portion of an employee’s paycheck and automatically pay it to a creditor — what we usually call “garnishing wages.”
A quick reminder that my employer… is me. As the owner of my company, I got a letter instructing me to garnish my own wages.
I was still in the middle of negotiating a payment plan with the state. Thank goodness I was in control of my paycheck! If it’d been a typical employer, 20% of my paycheck would have been taken — and I might have agreed to a payment plan in the meantime.
This is the inhumane part I’m talking about. An agent at the DOR was just hitting buttons and throwing spaghetti at the wall to resolve this debt that was nothing but a line item to them, with no regard to the very human experience happening on the other end. And this was only the first way they did this.
I did not, in fact, garnish my wages. I continued to request payment plans and have them rejected, as well as request a reduction in the percentage of the wage attachment. All to no avail — it seemed quite reasonable to the DOR to lop off nearly a quarter of my income each month to repay a debt I’d just learned about.
Ignoring a wage garnishment order can come with consequences for a business. I don’t know what those are, but the letters I continued to receive from the DOR warned me they could exist. I gambled a little that I’d be able to resolve the issue another way before they went that far.
Finally, I got a much more concerning notice: The DOR had put a levy on my checking account. That means it instructed my credit union to pull money from my account and send it to them.
Again, around a day after I got the notice of the bank account levy, my business got a letter from the DOR about the wage attachment. While they were pulling money from my bank account, they were still going to take it from my paycheck. When I asked about that, I was assured any overpayment would be refunded within about two weeks — what a kindness from a vulture.
There was enough money in the checking account being levied to pay off the debt, so I let the levy happen. I could have shuffled money around when I learned about the order, and the DOR wouldn’t have been able to take the full amount all at once. I could have then gone back to the drawing board with a payment plan. But I didn’t want this payment in my life for the next two years or more, so I let the money go all at once to get rid of it. I tend to prefer a tear-the-band-aid-off approach to money over a slow simmer of suffering.
I’m incredibly fortunate to have had $8,000 to spare for this debt — I’m not oblivious to this. My impoverished, 20-something self is astonished. But that money wasn’t just lying around. It was a cushion my partner and I had intentionally built on top of our regular comfort fund to make it easier for us to take risks in our businesses and buy a house this year.
That poorly handled surprise debt swiped that cushion out from under us. I don’t believe in financial emergencies, and I don’t see this as one. But I’m incredibly indignant about this whole affair. Particularly because it didn’t matter what kind of resources I had. Their efforts could have been the same if my income was $40,000 a year, and this would have been an incredible burden. For an old debt that could be a rounding error on the university’s budget.
This is why I share debt stories
This is the reason it’s so important to me to share these experiences. All of our debt stories are unique, so I don’t expect anyone to see themselves perfectly mirrored in my journey.
But I’m certain everyone understands the experience of debt, either for themselves or someone they know. We’re all part of this system where the things expected of us cost more than how much we’re compensated for our work. And we’re part of this system where the balance sheets of governments and corporations are valued above the everyday wellbeing of individuals.
There’s a good chance you or someone you know is struggling to make a monthly payment or you’ve been sued for debt or had wages garnished or have a low credit score or filed for bankruptcy or had a home or car taken away.
I want you to know that I went through all of this and made all of these choices — and my credit score today is 778 (that’s “very good” on the FICO scale).
Every way I’ve chosen to deal with debt throughout my life goes against conventional advice. And the consequences I’ve experienced are things budget culture paints as shameful — default, a lawsuit, wage garnishment, asset seizure.
But I’m OK. That DOR fiasco just wrapped up in January of this year, and later that month, I was approved for a mortgage to buy my first house (with a below-average interest rate).
Having the credit score and getting the mortgage aren’t the victories here, though. I celebrate choosing myself, my needs and my experience over the obligation and shame of debt every time. Debt payoff was never my priority, so I never let it get in the way of what I did prioritize — doing meaningful, creative work; traveling; enjoying local restaurants; spending holidays with my nieces and nephews; donating to causes I care about; sending money to a friend in a tight spot.
Advice around debt often assumes there’s just one path, that you have to give into whatever the creditor is demanding. But this is a two-way relationship. Always consider your options and priorities before letting debt put a stranglehold on your resources. Clearing a line item in a corporation’s budget is just never that important.
My debt stories: Default, wage garnishment and bank levies — oh my!