Fugate was 22 at the time and used the money to buy two cars, a boat, a home in the small town in Kentucky where he grew up and “lots of beers for my friends because I needed friends after the war.”

The problem: Fugate is blind. He couldn’t drive the cars, operate the boat or live in the house. An improvised explosive device (IED) blew up in his face two days before he was due to come home from Iraq. He lost one eye in the explosion and is blind in the other.

He burned through the $100,000 compensation he got from the Army in 18 months.

“I wasn’t one of those homeless vets you see on the streets,” Fugate told Debt.org, “but that’s the direction I was headed.”

That’s when Mike Conklin and a team of volunteers from the Sentinels of Freedom stepped in and changed the direction Fugate was headed. Conklin started the Sentinels of Freedom as a nonprofit organization dedicated to helping severely wounded veterans earn a college degree. The Sentinels have volunteer teams across the country working with vets to help them overcome whatever obstacles they meet in college.

With their help, Fugate expects to graduate from Cal State University Monterey Bay (CSUMB) with a computer science degree in 2014. He already has interviewed with companies in Silicon Valley and hopes to get a full-time job there after graduation.

“And I’ve made considerable progress at getting back the money I went through,” Fugate said. “Even after the accident, I was always sure I could do something positive with my life, but I didn’t have a plan and I sort of let that $100,000 get away. But the friendship and mentoring I got from Sentinels turned things around.”

Mentoring Disabled Veterans Makes a Difference

Fugate is one of roughly 40 to 60 severely wounded soldiers that the Sentinels of Freedom mentor around the country. Conklin interviews candidates to determine how serious they are about pursuing a college degree. When he’s convinced of their commitment, he helps them find a suitable college and pairs them with a team of educational, financial and social mentors to guide them through the process.

Fugate admitted he needed help in all three areas. He was the first in his family to attend college, but lasted only one semester before dropping out to join the Army. There was a seven-year gap before going back to school with the help of the Sentinels program.

“I was skeptical about the whole thing,” he said. “I remember when I got out of the Army, they told me to be wary of organizations that try to take advantage of vets, but I knew I was in the right place after my first phone call with [Conklin]. When he says they’re going to do something, they follow through and do it.”

Fugate received his associate’s degree from Monterey Peninsula College in California and went on to CSUMB, but math and science courses at the four-year college posed enormous challenges.

“He obviously can’t see the problems on paper so he has to use his memory to do the problems in his head,” said Karen Hargrove, a Sentinels volunteer who tutors him. “He has learned to do this well, but it takes a lot of patience.”

Filling Gaps in Financial Aid

When he started school, Fugate needed to customize his computer with a special Braille program, but the $4,000 price tag was an obstacle. He might have gotten help from the U.S. Department of Veterans Affairs, but the paperwork made it a six- to eight-month turnaround. Sentinels stepped in, paid for the program and his computer was ready in a week.

“[Conklin] said he won’t let the cost of anything be an excuse for getting in the way of my education,” Fugate said.

Sentinels assigned him a financial advisor, who not only helped Fugate budget his money, but also renewed his sense of pride.

“I’ve learned to make my money work for me,” Fugate said. “I’ve saved and invested enough so that by the time I graduate, I should be able to put 50 percent down on a house where ever I go to live.”

As for the social aspect, moving from the hills of Kentucky to the sunny California coast is about as dramatic a change as there could be in life. Fugate says it was no problem.

“The social relationships I’ve developed from the Sentinels of Freedom are really what have made the biggest difference,” Fugate said. “All these people have volunteered their time and knowledge toward making me successful and you can really feel that every time we meet. I’ve had the best of everything I need because these people care about me.”

Fugate wants to use his experience to develop computer programs for the blind when he graduates. Sentinels already introduced him to contacts in the software business and living near Silicon Valley makes that dream a bit more accessible.

“I’ve come a long, long way since pretty much throwing away $100,000,” Fugate said. “I would never have been able to do this on my own. Sentinels of Freedom didn’t just lift me up, they pushed me forward.”

That’s because student loan debt now exceeds credit card debt for the first time. Also, there’s mounting evidence that student loans are beginning to crowd out other types of borrowing and spending, and most importantly, eating into the housing and auto markets – two key traditional drivers of economic growth.

The federal government is attempting to meet this looming crisis on two fronts: Modify private student loans, much like mortgage modifications; and slash the interest rate on federal student loans to near-zero percent.

Cut Student Loan Interest Rate to Near-Zero Percent

Senator Elizabeth Warren (D-Mass.) this week introduced the Bank on Students Loan Fairness Act, her first piece of stand-alone legislation.

The aptly titled bill would require the student loan interest rate on all new subsidized Federal Direct Stafford Loans, which the government pays the interest while the student is still enrolled in school, set at 0.75 percent — the same rate the Federal Reserve offers to the nation’s biggest banks.

In offering her bill, Warren pointed out that the federal government generates a profit of more than 36 cents for every dollar lent to student borrowers. The Treasury is expected to earn $33.5 billion off student loans made during the 2013 fiscal year, according to the Department of Education’s budget.

“We shouldn’t be profiting from our students who are drowning in debt, while we’re giving a great deal to the big banks,” Warren said on the Senate floor. The average student loan debt is currently $26,800.

While it’s highly unlikely that Congress will agree to Warren’s low-ball gambit, the senator has laid down the gauntlet, challenging her colleagues to confront the looming July 1^st deadline when subsidized Stafford Loan rates are set to double from 3.4 percent to 6.8 percent.

If Congress refuses to act, incoming college freshman could end up paying $5,000 more for the same student loans previously taken out by their upperclassmen, but at the much lower rate.

Refinance Private Student Loans

The Student Loan Affordability report, released this week by the Consumer Financial Protection Bureau (CFPB), contains proposals that seek to modify private student loans.

The report outlines several options it wishes private lenders to explore and potentially endorse, including: Interest rate reductions, term extensions, principal forbearance, principal reductions and possibly rolling over all private student loans into the federal student loan portfolio.

While private student loans account for only 15 percent of all student loans, they comprise 80 percent of all high-debt loans, which are those above $40,000.

But unlike federal student loans issued by the government and regulated by the Department of Education, private lender loans don’t allow for repayment options and usually carry higher interest rates.

These proposed modifications would help both consumers and lenders forestall default, much like restructuring federal student loans when the borrower is having trouble repaying them.

Congress Must Act Quickly on Debt Proposals

Warren’s challenge is a bold one.

If Congress chooses to turn its back on a generation of student borrowers, while maintaining the same financial institutions that helped crash the economy, it would send an unmistakable signal regarding where its priorities lie.

A few weeks ago, Congress responded within days to the complaints of airline passengers who endured travel delays after the sequester had reduced the number of federally paid air traffic controllers. A hastily passed bill allowed the Federal Aviation Authority to free up funds designated for airport construction in order to keep the number of controllers high enough to prevent future airport snafus.

Congress now has less than two months to respond to a much greater threat to the economy, not to mention the futures of millions of young Americans. When other interest rates remain low, there seems little justification to maintain relatively high rates for those least likely to afford them.

Will Congress act, or will it look at the calendar, see that school is out, and just go home for the summer?

Almost every arrow economists want pointing up – home sales, auto sales, stock market – is up. Meanwhile, interest rates and unemployment figures continue to decline.

Whether that picture is a true reflection of an economy on the mend is still subject to interpretation and debate, says economist Jim Wilcox of the University of California, Berkeley.

“Yes things are better and the economy is motoring along, but slowly,” Wilcox told Debt.org. “Some of the key factors, like employment, are stuck in second gear, while business is in fourth gear. We want them both in fifth gear and it’s going to take a while for that to happen.”

The stock market began the week with the Dow Jones and S&P 500 on all-time highs. The Dow Jones traded briefly over 15,000 for the first time in history Friday before closing at 14,972.19. The S&P finished Friday’s trading session at 1,614.22. The NASDAQ also had a winning week, moving up 38 points on Friday to finish at 3,378.63

Unemployment down

The good news from Wall Street was fueled by a better-than-expected labor market report.  The U.S. Department of Labor reported the unemployment rate in April fell to 7.5 percent — the lowest it’s been in four years. The federal agency also showed that 165,000 jobs were added in April.

The number of people filing for unemployment benefits for the first time fell to 324,000, the lowest level since January 2008, records show.

The employment news contradicts popular sentiment that the job market would slow down as the economy felt the effects of sequestration, the $85 billion reduction in government spending.

Mortgage rates dropping

The housing industry is riding a long run of mortgage rates that are at or near all-time record lows. The 30-year fixed mortgage rate dropped to 3.35 percent, not far behind the all-time record low of 3.31 percent set on Nov. 21, 2012.

The 15-year fixed-rate was a record low of 2.56 percent — that’s down from 2.61 percent a week ago and lower than 3.07 percent in 2012. Adjustable interest rates also dropped. The one-year and five-year ARM rates are at 2.56 percent.  Federal Reserve officials have indicated the low rates will continue until the unemployment rate shrinks to 6.5 percent.

Those rates continued to fuel the rebirth of the housing market with more people buying homes. Prices on residential real estate have been the highest since May 2006. The S&P/Case-Shiller index of property values increased to 10.2 percent over the past year. Home values in Phoenix, Ariz. lead the way with a 23 percent jump from a year ago. Values in San Francisco were up 18.9 percent and Las Vegas advanced 17.6 percent.

Not surprisingly, the positive vibes from the housing industry have helped re-start the lumber industry.

The lumber industry, which did 37.5 billion board feet in 2012, is on pace to go over 40 billion in 2013. That is still a long way from the 65 billion board feet produced in 2005 at the height of the housing boom, but also is a considerable improvement from the 33 billion feet sold when things bottomed out in 2010.

“We’re probably doing double the construction we did at the depths of the recession and the interest rates are fueling more purchasing power, which is helping home sales rebound,” Wilcox said. “But remember, that is still far less construction than what we’d like in our economy. The housing boat has come off the ocean floor, but it still hasn’t broken the surface for where it should be.”

Boost in Auto Industry

The Big Three automakers – GM, Ford and Chrysler – saw their share of the car market increase 46.7 percent, up from 44.7 percent a year ago.

Truck sales led the way in April with 153,356 sold — that’s a 27 percent increase from 2012. It’s a sign that small businesses that depend on these vehicles as tools are replacing them as the economy improves.

“We’ll know the economy is really moving when the unemployment rate begins with 5-something,” Wilcox said. “Businesses are doing well from the standpoint of profits, but we’d like to see them put some of that money into hiring. When the unemployment rate hits 5-something, that’s a number this economy can safely and sensibly operate in.”

Representative Tom Petri (R-WI), co-sponsor of the Earnings Contingent Education Loans (ExCEL) Act that would simplify student loan repayment by tying it to the borrower’s salary level, disputes alarmists concerns about the effect that the $1.1 trillion in student debt is having on the economy.

“The rising cost of a college education is troubling and has led to over-borrowing,” Petri told Debt.org. “However, terming the student loan debt problem as a ‘bubble’ in the same way the housing ‘bubble’ resulted in an economic collapse, I think is misleading.”

Student loan debt was at $364 billion in 2005, but has nearly tripled since then, climbing over the $1 trillion mark in 2012. More than 60 percent of today’s college students took out loans to get through school and the average graduate owes $26,600.

Petri teamed with Rep. Jared Polis (D-CO) to draw up legislation that would make it easier and more affordable to pay that money back.

Deduct Student Loan Payment From Paycheck

Their bill asks employers to withhold a percentage of the employee’s salary (estimated between five and 10 percent for starting jobs) to pay off student loans. It’s similar to the procedure for withholding tax. The amount the borrower repaid would increase as salary rose, and decrease if earnings dropped or they became unemployed.

“When students graduate from college, traditionally they will make less,” Petri said. “As they progress in their careers, they’ll earn more. The repayment schedule should follow this trend.”

Petri said he and his staff have met with several business owners to make sure the bill doesn’t overwhelm them. Most businesses already withhold money from employee paychecks for payroll taxes, insurance costs, and 401(k) investments.

“It’s important that the provisions in the bill don’t create a heavy burden for employers,” Petri said. “We want to ensure that the additional withholding is as consistent with current practices as much as possible.”

Deadline for Student Loan Bill Approaching

It’s unlikely the House will act quickly on the bill, but there is a firestorm brewing over the rise in interest rates for students with subsidized Stafford loans. Unless Congress intervenes, the current rate of 3.4 percent will double on July 1 to 6.8 percent.

The ExCEL Act would tie interest rates to the 10-year Treasury rate, plus 3 percent. That rate would be fixed for the life of the loan. As of May 3, the Treasury rate is 1.66 percent – making the fixed interest rate 4.66 percent.

Monthly payments under the ExCEL Act would be calculated using the borrower’s starting salary and the current poverty line income. For example, someone with a starting salary of $30,000 would make monthly payments of $159.

The bill has been introduced, but could take a while to get through the Education and Workforce Committee. Petri and Polis are waiting on a report from the Congressional Budget Office on the savings this legislation would bring over the current programs administering student loans. It is expected to provide substantial savings.

The ExCEL Act would retain loan forgiveness polices for certain programs such as teaching in high-need public schools, military service, serving as a public defender,  but eliminate many of the jobs listed in the 2007 Public Student Loan Forgiveness Act.

“I’m optimistic that this proposal can be part of any effort to institute a long-term fix to the interest-rate problems or part of efforts to reauthorize the Higher Education Act,” Petri said.

The Husbands, both computer engineers, were making payments on two cars, student loans and owed the federal government more than $20,000 in back taxes in 2005. They were paying on a home equity loan, a timeshare, medical bills and had credit card debt that “was somewhere around $20,000, but I can’t even tell you where it came from,” Toni told Debt.org.

And that didn’t include the monthly mortgage check for a $160,000 condominium they bought near downtown Chicago.

Toni’s solution to this pile of woes: Buy a laundromat. After all, what’s an additional thousand-plus dollar investment when you’re already knee-deep in debt?

“Everybody who buys a business goes into it thinking the same thing: ‘Oh, this will make a lot of money … everything’s good,’” Toni said. “But if you’re knee-deep in debt, the first thing to do is stop borrowing. The next thing is to cut up all your credit cards, except one, and stick that one in the freezer. That’s what we should have done!”

Deep Debt? Stop Digging

Toni can say that now because she spent seven years getting out from under the mountain of debt she and Colin built. They paid off the last of their credit card debt on Dec. 5, 2012. The journey, and the determination the Husbands showed throughout it, made them the runaway winners in “Debt Hero” — Debt.org’s social media contest.

“Debt was necessary, inevitable and unavoidable 10 years ago,” Colin said. “I felt like we could manage, but now I recognize the value of not being in debt, at least not to the extent we were [in].”

So does Toni. She sums up her feeling in one line: “If we don’t have the money for the purchase, we aren’t buying.”

The Husbands, like many couples, married into debt. She brought $21,000 in student loans to the ceremony and he had about the same amount due in credit card bills. A year later, they bought the condo and, because they loved to travel, threw another $8,000 at a timeshare.

Around town, they often ate out, took advantage of Chicago’s many entertainment opportunities and didn’t think twice about dropping $50 on a visit to the movies. They had good jobs and could easily make the minimum payments due on every debt they incurred.

So that’s what they did: Pay the minimum and watch their debt swell out of control.

Make a Plan to Cut Debt

Eventually, the debt load became a regular topic of discussion. Toni had voluntarily quit work to lay the foundation for opening a business. Then Colin lost his job and the discussions took on a new tone.

“We realized that we had to get on the same page,” Toni said. “I was always uneasy about carrying debt, but Colin was like ‘Hey, as long we can cover the payments, don’t worry about it.’

“That changed when we were both unemployed. He was only out of work two months, but it brought a lot of clarity to our situation.”

They spent the next four months drawing up a budget and ignoring it. Lots of blue, green, red and yellow markings made for a beautiful spreadsheet, but it sat neglected on the computer screen. Toni decided to post it on the refrigerator and suddenly the budget came alive.

“It’s easy to see where you’re wasting money when it’s right in front of you every day,” Toni said. “I don’t think either one of us realized we were spending $200 to $300 a month eating out and another $150 a week at the grocery store, most of which was going to waste because we were eating out so much.”

Reduce Debt with Lifestyle Change

Habits changed. They ate in instead of eating out. They rented a movie instead of going to the movies. They quit leasing cars and bought them. They stopped traveling and found things to do locally.

Toni insists they didn’t stop living. They just paid more attention to how they were living.

“You’ve got to find ways to enjoy life during this process,” she said. “We swapped out costly activities for free dance in the park festivals. I pay for low cost tennis lessons ($40 a month) or just play with friends on public courts.”

The Husbands attacked the debts one at a time, starting with the smallest. Toni got a job and dedicated her paycheck to reducing the debt. With two incomes and a more disciplined approach, the debt slowly, methodically and sometimes painfully, dissolved.

The experience taught Toni so much about finance that she and two friends opened a business they call Debt Free Divas that offers financial coaching.  Her advice follows her own experiences.

“Debt is not a good thing,” she said. “Make a budget and stick to it.  Save regularly and build an emergency fund. Realize this is a marathon, not a sprint. You’ll find a whole lot less stress in your life when you’re living debt free.”

Both moves helped the economy.

Consumers paid down debt, especially mortgage and credit cards, at a record pace from 2008 to 2010, a decision that helped stabilize the American economy after the credit crisis and financial meltdown of 2008.

Now that things are settling on the credit side, the economy could use some help from consumers in the form of spending money on more products and services, which they did in the first quarter of 2013. Consumer spending was up 3.2 percent, the biggest gain in more than two years.

That helped keep the economy growing at a slow, but steady rate of 2.5 percent, just under the predicted rate of 3.0 percent.

“The good news is that consumers seem interested in spending again,” Justin Wolfers of the Brookings Institution said on the group’s website. “We’ll see whether that holds up over the coming months.”

Debt Declined Dramatically

According to a report done by the Federal Reserve Bank New York, consumer borrowing, which peaked in 2008 at $12.7 trillion, fell to $11.3 trillion by 2013, an 11 percent decline.

Much of the decline is attributed to banks reducing available credit and tightening up rules for getting loans, but there is evidence that consumers got the message about borrowing to pay for their lifestyles. Loans to consumers dropped $500 billion during that period.

“While tightened lending standards have played a major role in the declining liabilities of the household sector, consumer-initiated reductions in debt have contributed as well,” the Federal Bank’s report said.

Much of the decline has to do with a drop in the use of credit cards. Credit card debt was $1.03 trillion at its peak in 2008, but dropped to $848 billion in February 2013, a 15 percent decline.

Total household debt, which includes mortgage, credit cards, student loans and auto loans, also dipped, going from a high of $13.8 trillion in March 2008 to $12.83 trillion at the start of 2013, a 7.2 percent decline.

The news about spending had a good side and a bad side. On the good side, the demand for automobiles and big-ticket appliances is still strong. Also up is the consumption of services, which grew 3.1 percent, the biggest gain for that sector in eight years.

And Now Comes Sequestration

However, some economists worry that a dark side is coming when the effects of sequestration kick in. Sequestration, the forced reduction in spending by the federal government, started March 1 and was barely felt in that quarter.

It could, however, be a kick in the gut to the economy the rest of the year, when the bulk of the $85 billion in reduced federal spending hits, especially from the Defense Department. Growth in the next quarter is supposed to be just 1 percent, and predictions for 2013 say growth will remain at about 2 percent for the fourth straight year.

“The bigger picture is that we have a fledgling recovery which needs help, but isn’t getting it,” Wolfers said.

Researchers from three separate agencies recently released data that showed graduates are leaving school with so much debt that it’s affecting their ability to purchase new cars and homes, two of the basic staples of the American economy.

The first blast came from a study done by the Federal Reserve Bank of New York that showed the debt amount for 25-year-olds has nearly doubled in the last nine years, rising from $10,649 in 2004 to $20,326 in 2012. The study also said that the percentage of 25-year-olds with student debt rose from 25 percent to 43 percent in that time.

Home buying for that group dropped dramatically during that time from (33 percent down to 22 percent), as did car buying (38 percent down to 30 percent).

“While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace,” said Meta Brown and Sydnee Caldwell, who authored the New York Fed’s report.

“Lowered expectations of future earnings and more limited access to credit may have broad implications for the ongoing recovery of the housing and vehicle markets, and of U.S. consumer spending more generally.”

Is Anybody Repaying Loans?

Another study released by TransUnion, one of three agencies that do credit reports, paints an even bleaker picture.

According to TransUnion, more than half (51 percent) of student loans were in deferment or forbearance in March of this year. That means the borrower was excused (temporarily) from having to make monthly payments. TransUnion estimated the amount of money not being repaid at $388 billion, a 70 percent jump over the last five years.

There are a variety of legitimate reasons to stop paying a student loan: Going back to school, joining the military or volunteering for the Peace Corps. However, the reason most given was unemployment or under-employment.

Either of those produces a negative cycle for the economy, in that less money is spent on goods or services. The resulting falloff in sales means companies can’t hire new workers and thus unemployment doesn’t improve.

Even Retirement Affected

And piling on is the Center for Retirement Research at Boston College, with a study that shows that student loan debt is crippling college graduates at all ages and could have negative ramifications when they reach retirement age.

The BC study looked at workers in their 30s and determined that 62 percent of them likely will not have enough resources when they retire because they are so bogged down with student debt. According to the study, 20 percent of the people in their 30s have more than $50,000 in student loan debt.

It’s not much better for people in their 40s. The New York Fed says that 5.7 million people ages 40-49 are still paying off student loans, a 72 percent jump from just seven years ago. Even the 60-plus group is growing, with more than 2 million seniors headed toward retirement with loan balances still due.

The Consumer Financial Protection Bureau (CFPB), a new government agency, is looking at ways to help borrowers deal with the problem of student loans, but not even they sound optimistic.

“The ugly surprise after graduation day is that entry-level salaries are often no match for massive monthly student loan payments, or worse, there’s no job available by the time the first payment comes due,” Rohit Chopra, student loan ombudsman for the CFPB, said in a release. “As more people default on their student loans, their credit ratings will drop, making it harder for them to access new credit and help grow the economy.”

In what is now becoming an all-to-familiar pattern, Massachusetts Attorney General Martha Coakley issued a warning to people to validate the charity before they donate, especially if the transaction is taking place online.

“After the unconscionable attack at the Boston Marathon, there has been an outpouring of support from people who want to help,” Coakley said in a press release. “We encourage people to do their homework on the charity before giving to ensure their money will go to the purpose they intend.”

Coakley’s alert echoes warnings from law enforcement agencies after the recent tragedies in Aurora, Colo., and Newtown, Conn. In both cases, scam artists set up websites that allegedly were collecting donations to be distributed to victims and their families.

Woman Arrested in Charity Scam

Some charity sites inevitably turn out to be bogus operations with most or all of the money ending up in the pockets of the site owners.

One New York woman was arrested after soliciting donations for the family of one of the children killed in the Sandy Hook Elementary School shooting. She allegedly told friends on Facebook that she was collecting the money for “funeral expenses.”

Authorities in Boston worry that the same thing is happening, after the tragic bombings that killed three people and injured nearly 200. Massachusetts Gov. Deval Patrick and Boston Mayor Tom Menino created a website called The One Fund Boston to help victims; is is considered the most legitimate place to donate.

The One Fund is considered the most legitimate place to donate.

However, many of the 125 domain names associated with the Boston tragedy don’t have that kind of accountability. Some of the domain names could not even be found just a few days later. Others claimed to be “under construction” with opportunities to donate money. Some sites actually opened with a warning for readers to be wary of any site soliciting donations for charities related to the tragedy.

“It is unspeakable that anyone would sink to capitalize on Boston’s sorrow as we recover from this tragedy,” Massachusetts Undersecretary of Consumer Affairs Barbra Anthony said in a statement to reporters. “We remind consumers to exercise caution and do their homework before reaching out to help.”

Ask Before You Donate

The Federal Trade Commission has a list of tips for anyone wishing to donate to any charity. The suggestions include:

• Ask for detailed information about the charity, including name, address, and telephone number.
• Get the exact name of the organization, and do some research. Searching the name of the organization online — especially with the word “complaint” or “scam”— is one way to learn about its reputation.
• Call the charity. Find out if the organization is aware of the solicitation and has authorized the use of its name. The organization’s development staff should be able to help you.
• Check if the charity is trustworthy by contacting the Better Business Bureau, Charity Watch or GuideStar.
• Ask if the caller is a paid fundraiser. If so, ask:

– The name of the charity they represent.
– The percentage of your donation that will go to the charity.
– How much will go to the actual cause to which you’re donating.
– How much will go to the fundraiser.

Consumer confidence and retail spending dipped in March, while the rest of the economy puttered along at a good-to-great pace.

Housing starts in March were up 7 percent over February and leaped 46.7 percent over March 2012. Banking giants JPMorgan, Wells Fargo and Goldman Sachs reported significantly higher than expected earnings for the first quarter of 2013. And consumer prices, fueled by an 11-cents-a-gallon plunge in gas prices, dropped for the fourth time in five months.

Yet the Thomson Reuters/University of Michigan Consumer Confidence index reached a nine-month low in April, falling to 72.3 from 78.6 in March.  That was lower than all 68 estimates Bloomberg received from a variety of economists.

“There is a wide disparity on how people view this recovery,” University of California-Berkeley Economics Professor Jim Wilcox told Debt.org. “There is considerable confidence in the business community that the economy is going to advance, though at a very moderate pace.

“That confidence hasn’t shown up yet in the form of re-employment for workers, and that’s a real mystery to everyone. Hiring has been hesitant. It’s moving a little too slowly, and that could be what is holding people back from spending in this economy.”

Housing, Banks Doing Well

The good news from the housing industry was tempered some by the fact that the big jump actually was more focused on multi-unit dwellings than single-family homes, which actually declined 4.8 percent.  While most builders are happy to be working again, there is concern throughout the industry that the rising cost of labor and materials is going to soften growth in the future.

The banking industry, by contrast, seems to have no worries. Goldman Sachs had a banner first quarter, earning $4.29 a share, 40 cents higher than analysts forecast. Profits at JPMorgan, the nation’s largest bank, were up $1.59 the first quarter, 21 cents higher than expected. Wells Fargo earned 92 cents a share, 17 cents higher than projected.

None of the good news showed up at retail stores, which saw spending drop 0.4 percent, the most in nine months.  This, despite the fact that the cost of clothing was down 1 percent, the biggest drop since 2001, and prices on clothing for infants and toddlers dropped the most since 1999.

What’s Your Economic Horizon?,

The resistance to spending could be a sign that consumers are starting to feel the effects of the 2 percent increase in payroll tax that happened Jan. 1 and worries about the effects of the government sequester.

“There is an enormous difference in people’s economic horizon — the amount of time they take to recover from significant news,” Wilcox said. “Some people will say things are better than they were three months ago, so they’re ready to get out and spend. Others will remember a year ago and though things have improved, they’re still conservative and only spend money on reducing credit card or mortgage debt.

“And then you have the people who still remember the disaster five years ago and are scared to spend at all. It’s a matter of a where your horizon is and how long you will take to make adjustments from it.”

“It is incredible irony, almost a paradox, isn’t it?” Katzman told Debt.org. “These guys (debt collectors) kept harassing me over a bill I didn’t owe, and then they end up having to pay me because of it. I thought it was great.”

The story of Katzman’s troubles with three debt collection agencies is a familiar one – paperwork problem between doctors and an insurance company – though him receiving $1,700 for being harassed, is a little unusual.

Katzman had a procedure done at a hospital in New York that he thought should have been covered by his insurance company. The insurance company asked for more paperwork from the hospital before it would pay. The hospital, in turn, asked to be paid, while it looked for the paperwork.

Katzman, who now lives in Florida, had to intervene, and eventually the insurance company got what it needed and paid the $500 bill.

Phone Never Stopped Ringing

Unfortunately, the hospital’s accountants already had turned the matter over to collections, and Katzman’s phone started ringing soon afterward. For the next four months, it rang … and rang … and rang.

“They had me on autodial and kept leaving this urgent-sounding message that made it sound like something life-threatening had happened,” Katzman said. “The message said ‘We have an important matter to discuss with you. Call us immediately.’

“So when I finally called them back, and they said it was a collection agency, and they wanted me to pay a bill I knew I already had taken care of … well, that got me mad.”

He told the collection agencies that the bill was paid and asked them not to call him anymore, but his cellphone kept ringing. He estimates they called him two or three times a day, 10-15 days a month. They called him at home early in the morning and late at night. Several times, they called him at work.

Rules Were Broken

Most times, he let the calls go to voice mail, but occasionally he would answer and ask them again to stop calling. When the phone still kept ringing, Katzman went online and looked up the rules for the Fair Debt Collection Practices Act (FDCPA).

“That’s when I realized these guys were breaking rules almost every time they called,” he said. “One guy told me there was a lawsuit pending against me unless I paid right then. A woman told me she had the bill right in front of her and that I owed it and asked me would I be paying with credit card or check today?

“They were just so aggressive and demanding and wouldn’t listen to me at all. That’s when I decided I had had enough, and it was time to put a stop to this nonsense.”

Katzman hired a law firm to write a cease-and-desist letter to the collection agency. He also turned over the careful notes he had taken during phone calls from the collection agencies. The calls stopped almost immediately, and with the help of his copious notes, his attorneys won a settlement, without ever having to go to court. Katzman took home $1,700.

“When the collection agencies start calling, the key is to know the FDCPA rules,” Katzman said. “Even if you do owe them money, which I didn’t, but even if you do, you still have rights. Tell them you want to do all the correspondence via mail and to stop calling.

“And if you quote them the FDCPA rules and they still don’t stop, go get a lawyer.”