Truthfully, I’m not really starting at square one. It’s more like square two or 1 1/2, if there is such a thing. I started working for my company in February 2004 and started contributing to the 401(k) plan November that year. I would have started contributing to it on day 1, but I was trying to adjust to having to live on my own wages. I was a student for many years living on Government loans and working random jobs for a local bike shop. When I got into trouble, there was always the Bank of Mom and Dad.

Part of the reason I say I’m at square one is that I did severe damage to my credit three years ago and even before while I was in school. I had my student Visa credit card charged off in 2004 and I defaulted on my student loan in 2005. I have a very good idea why my brain was in a jar for two years but that’s not really the point of this post. The point is, I royally screwed up and needed to fix it ASAP.

Step 1: Get Out of Collections

For those of you who have ever had to endure the pain or are beginning to go through the pain of loan rehabilitation, realize that you are still lucky. EdFund allows you to go through a “loan rehabilitation” program. For 9 months you will allow EdFund to make on-time payments by withdrawing directly from your checking account. After 9 months, they graciously remove the collections remarks from your credit report and you qualify for more federal aid. If anyone reading this is in default on their student loan, call EdFund now and get started fixing it. It’s a painful and pride swallowing experience but you have to do it. The last thing you want is to have paycheck withholdings or have the IRS withhold your tax refunds. Imagine how fun the conversation would be with your company’s payroll department explaining that one. Moral of the story is to pay your bills on time. I learned the hard way. Kiplinger has a good article to read for those of you in similar positions.

As of today, I’ve completed rehabilitation and am with a real lender trying to consolidate the loans. The loan period is over 10 years at 7.22% variable. If I can consolidate, I can lump the loans together at a fixed interest rate. Part of my punishment is the interest rate I have to pay. The interest rate on the loan I screwed up on was at 5%. My girlfriend graduated around the same time I did and pays 3.5%. She’s fiscally responsible by the way. Payments are setup to withdraw directly from my checking account. The lender notified me that on a certain day every month the minimum payment amount will be pulled. I account for the debit in my check register. I use one now since I actually care about my finances.