How to get your student loans out of collections & stay out for good

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If you stop making payments on your student loans, they could fall into default and even get sold to a debt collector. Having student loans in collections can cause a heap of bad consequences, so it’s crucial to learn how to get your student loans out of collections and back into good standing.

Student loans in collections: How they get there

If your student loans end up in collections, it’s because you’ve entered student loan default. Federal student loans go into default if you haven’t made payments on your loans for 270 days. Rules for private student loans vary, but they can go into default even sooner, sometimes after a single missed payment. Once this happens, the balance of your loan is due immediately, which is commonly known as “acceleration.”

What happens once your student loans are in collections

If your student loan is in collections, there are a ton of potential consequences — and several of them can cause real financial pain.

 

If your account goes to collections, you’ll be assessed collection fees in addition to the student loans you owe. These fees vary depending on who holds your loans, but they can be anywhere from about 18% to 40% of your outstanding balance. Just to put that in perspective, adding an extra 40% to a student loan balance of $30,000 would mean your new balance is $42,000.

 

And if these fees aren’t bad enough, it doesn’t end there. As long as your loans remain in default, the following can also happen:

  • Wages can be garnished and income tax refunds can be taken to repay debt.
  • You can become ineligible for federal financial aid.
  • You can become ineligible for a deferment on loans.
  • You can lose subsidized interest benefits.
  • Defaulted loans will appear on your credit report for up to seven years, negatively affecting your credit score and your ability to get other types of loans.

Student loan collection agencies will attempt to collect this debt from you. As you’ve probably heard, debt collectors sometimes use aggressive tactics to get you to pay the money you owe. If you’re being contacted regularly, make sure you understand your legal rights under the Fair Debt Collection Practices Act.

 

Knowing these laws can affect not only how much you owe, but also how and when debt collectors can contact you to recover what you owe. There’s a lengthy list of what student loan collection agencies aren’t allowed to do to get you to pay.

 

Below are a few collections agencies for federal student loans:

  • Action Financial Services
  • Bass & Associates
  • Central Research
  • Coast Professional Inc.
  • Credit Adjustments Inc.
  • FH Cann & Associates
  • Immediate Credit Recovery Inc.
  • National Credit Services
  • National Recoveries, Inc.
  • Professional Bureau of Collections of Maryland
  • Reliant Capital Solutions

Here’s what debt collectors are barred from doing:

  • Harassment, like threatening you or using obscene language
  • Lying to you or tell you you’ll be arrested if you don’t pay
  • Hounding you at inconvenient times, such as early in the morning or late at night
  • Calling your place of employment if they’ve been told in writing or over the phone not to call you at work
  •  Contacting your employer
  • Sharing your debt information publicly

The debt collection agency also must send you a written debt validation letter telling you how much you owe, who you owe it to and how to dispute the charges if necessary. You can find the full list of practices prohibited by the Fair Debt Collection Practices Act on the FTC website. If you feel that a debt collection company has violated your rights, you can file a complaint with the Consumer Financial Protection Bureau.

How to get federal student loans out of collections

Hopefully, these alarming consequences have convinced you to do all you can to stay out of default. But what if you’re already dealing with student loan collections? You probably want to get out.

 

If you’re in collections, you’ll need to take action to get out. Ignoring the problem won’t make it go away. One simple way to get out if you’ve just landed in default is to get caught up on payments quickly. If you make a qualifying payment on a federal student loan that will result in your being less than 270 days delinquent, you may be able to remove the default and collections status immediately. If not, you still have four other options for reviving federal student loans:

  1. Rehabilitation means agreeing to a payment plan with the Department of Education. Once you’ve made the required number of payments on time, your loan may become rehabilitated.
  2. Student loan consolidation can help by combining the balances of several loans into one, and this can include loans in default. However, the Department of Education says you’ll typically be “required to make at least three consecutive, voluntary and on-time payments prior to consolidation.”
  3. Discharging student loans with bankruptcy may be an option, too. While it may be difficult to have your loans discharged in bankruptcy, it’s not impossible if you meet the right conditions.
  4. Full repayment: You could just repay the entire amount of the loan. However, given the size of most loans, this probably isn’t a feasible option

How to get private student loans out of collections

Private student loans unfortunately don’t qualify for the federal loan-specific programs above.

 

If you have private loans in default, it’s important to take action right away to get your debt out of collections. If your account has already been sent to a debt collection agency, here are five steps you can take to get back on track.

1. Dispute the debt

First, ensure that the information the debt collection agency has is accurate — you might not owe money at all. Your loan servicer might have reported your account as in default by mistake, or someone could have taken out a loan in your name.

 

Review your credit report for accounts opened in your name, including student loans. Make sure the dates and amounts listed are accurate. If there are any issues or if you notice a loan on your report that you didn’t take out, you’ll need to open a dispute with both the loan servicer and the three major credit reporting agencies.

2. Settle your debt

If you defaulted on private loans, you might be able to get your loans out of debt collections by settling the debt.

 

Under this approach, you negotiate with the debt collections company to pay off less than what you owe. For example, if you owed $20,000 in student loans, you might be able to pay just $15,000.

 

However, getting a settlement can be difficult. If the agency agrees to your terms, you’ll likely have to pay the amount you owe in one lump sum, so you’ll need a good amount of cash handy. It’s also important to make sure any agreement you make is in writing — even better if you can have a certified student loan counselor or lawyer review the contract.

3. Pay the amount owed

Although it might sound impossible, paying off debt in collections is the quickest way to resolve your loans.

 

If you’re able, consider asking friends or family for help paying your outstanding balance. Or you can take on an extra job or side hustle to increase your income. Those options might not be ideal, but having debt in collections can damage your credit and have long-term consequences. Getting out of student loan collections as quickly as possible will get you back on your feet much faster.

4. Consolidate or rehabilitate your loans

Another way to resolve debt in collections is by consolidating your loans.

 

Note that only federal student loans are eligible for consolidation and rehabilitation (as detailed above). Private student loans are eligible for consolidation through refinancing with a private lender, but you’ll probably have a tough time qualifying if you’re in student loan collections.

 

You could try speaking with a lender about your options, and find out if adding a cosigner to your refinancing application could help.

5. Declare bankruptcy

If you’re being hounded by debt collectors but are unable to resolve your debt by other means, bankruptcy could be an option. Student loans are difficult to get rid of in bankruptcy, but it’s not impossible.

 

To qualify, you’ll need to demonstrate to the court significant hardship, such as a medical issue that prevents you from working. You’ll also have to prove that it would be impossible for you to repay the loans while maintaining a basic standard of living.

 

Declaring bankruptcy is a huge decision that can impact your life for years, so make sure you’ve exhausted all of your other options before exploring it.

 

Your alternative option is waiting until the statute of limitations on your debt runs out – but the debt collector could sue you in the meantime.

How to avoid having student loans in collections

Once your loan is out of default, be careful not to end up in the same spot again. Hopefully, you’re now on a manageable payment plan that lets you repay without missing payments and falling behind again — but it’s possible that could change. The key is to be proactive and get help if you do run into problems before you end up in collections again.

 

To start, make sure your payment plan is the right option for you. There are various student loan repayment plans (for federal loans) that can bring the monthly payment amount down based on a variety of factors. Just keep in mind that many of these payment plans could increase the total amount you’ll have to repay.

 

And for federal and private loans, look into loan repayment assistance programs that could deliver meaningful benefits, depending on your career and home state.

 

If you can’t pay or otherwise need to pause payments, see if either student loan deferment or forbearance is an option for you. Deferment means you can temporarily stop making payments on your loans, and interest doesn’t accrue on federal direct subsidized loans during that time. You’ll typically be eligible if you’re enrolled in college at least half-time or, in other cases, are enrolled in unemployment or military service.

 

Forbearance isn’t as advantageous as deferment, as you’ll have to pay interest on all loans (federal and private loans), but it will keep you out of default. With forbearance, you may be able to stop making monthly payments for up to 12 months due to financial hardship, illness or other reasons. Confirm details and eligibility with your federal loan servicer or private lender.

 

Bottom line: Always take action to find potential alternatives to ending up in default. You’ll be glad you did.

 

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Love money? You’re not alone. But what do you really know about money?

We’ve rounded up dozens of facts covering currencies from all over the world, including historical and weird facts you probably don’t know.

Here are 100 fascinating money facts for you to enjoy.

 

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The study of money is called numismatics.

 

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The first Philadelphia Mint used horses in harness to drive the machinery that produced coins.

 

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The first paper money was made in China 1,000 years ago.

 

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The first coins were made about 2,500 years ago.

 

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Queen Elizabeth II has appeared on more currency than any other person.

 

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There are over 170 different currencies in use around the world.

 

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There is more Monopoly money printed every year than actual money.

 

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Only 8% of currency is in physical form.

 

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Money is estimated to be dirtier than a toilet.

 

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Pennies planted in the garden will repel slugs.

 

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The TSA collected $765,759.15 in loose change at airport security checkpoints in 2015.

 

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The average allowance is $65 a month.

 

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Piggy banks originated from the “pygg,” a clay used for making jars that held money.

 

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In fact, there is an ATM in Antarctica.

 

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Over half of lottery tickets are bought by 5% of people.

 

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Drug Lord Pablo Escobar had so much money laying around that rats ate approximately $1 billion.

 

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Putting bills in the microwave for about 20 seconds will make them crispy again.

 

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The largest denomination ever printed was in Hungary in 1946, worth 100 quintillion pengoes.

 

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The word “salary” comes from sal, meaning “salt” in Latin. Early Romans used salt as money.

 

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The world’s worst inflation is in Zimbabwe. There was a 6.5 sextillion percent inflation rate in 2008.

 

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The word “cash” originated in ancient China, where a bundle of 100 coins was called one cash.

 

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The word “cent” is derived from the Latin centum, meaning “hundred.”

 

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The term “cash cow” originated from early forms of currency in the form of livestock.

 

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The International Space Station is the most expensive object ever built at $150 billion U.S.

 

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Sea shells were once commonly used as money in many parts of the world.

 

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Even spending $1 million a day, it would take Bill Gates 218 years to spend all his money.

 

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Credit cards originated in the U.S. during the 1920s and could be used at individual companies.

 

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The first credit card that could be used at a variety of companies was introduced by the Diner’s Club in 1950.

 

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The first national bank card was BankAmericard, which began in California with Bank of America in 1958. It was later renamed VISA in 1976.

 

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Apple earns $300,000 per minute.

 

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The Secret Service was originally created to fight counterfeiting in 1865.

 

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It takes 12-15 years of training to become a money engraver.

 

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The first gold rush in the U.S. happened in 1799 in North Carolina, when a 12-year-old boy found a 17-pound gold nugget on his family’s farm.

 

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The average adult has between 8 and 10 credit cards.

 

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Walter Cavanagh, also known as Mr. Plastic Fantastic, has more than 13,000 credit cards.

 

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The Latin E Pluribus Unum means “one out of many” and means one country out of many.

 

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A $1 bill lasts an average of 18 months, a $5 bill lasts two years, a $10 bill lasts three years, a $20 bill lasts four years, and $50 and $100 bills last an average of nine years.

 

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38 million notes with a face value of $541 million are printed every day.

 

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Ninety-five percent of the notes printed each year replace those already in circulation.

 

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Almost half of all notes printed are $1 bills.

 

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Paper bills are made of 25% linen and 75% cotton.

 

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Martha Washington is the only woman to appear on a U.S. currency note back in 1886, 1891, and 1896.

 

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A two-cent coin was minted between 1864 and 1873.

 

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The marks “S,” “D,” “P,” or “W” designate the Mint where the coin was produced.

 

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The four U.S. Mints are located in Philadelphia, Denver, San Francisco and West Point, New York.

 

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Quarters were originally made of silver.

 

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Lady Liberty was on the quarter for over 100 years before being replaced by George Washington in 1932.

 

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The penny is the only coin where the figure faces to the right.

 

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A penny costs more than a penny to make (about 2.4 cents).

 

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The largest U.S. currency was the $100,000 bill.

 

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A farm in Delaware mulches 4 tons of U.S. bills into compost daily.

 

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Counterfeit currency is frequently detected because they are more perfect than actual currency.

 

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454 bills are equal to one pound.

 

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The most counterfeited bill is the $20 bill.

 

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Each bank printed its own money until the Federal Reserve was established in 1913.

 

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The $1 bill contains many references to the original 13 colonies (look for things in 13).

 

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Many communities throughout the U.S. have their own currency, such as Walt Disney World.

 

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The 1913 Liberty Head nickel sold for $43.7 million, with only 5 known to exist.

 

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Coins have ridges to deter counterfeiting, as people used to shave the edges off coins back when they were made of gold and silver.

 

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There are 119 grooves on the outside of a quarter.

 

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No living person can have their face on currency.

 

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Queen Isabella of Spain was the first woman to appear on a U.S. coin.

 

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Benjamin Franklin and Alexander Hamilton are the only non-President to appear on a U.S. bill.

 

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$2 bills are largely considered unlucky.

 

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Eighty-five to 95% of paper money contains traces of cocaine.

 

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The $1 bill hasn’t had a redesign in over 50 years.

 

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Security threads on different U.S. bills glow in different colors.

 

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All U.S. bills cost less than 20 cents to make.

 

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All U.S. dollar bills are printed in either Washington, D.C. or Fort Worth, Texas.

 

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The original Article of Confederation (the predecessor to the Constitution) gave states the right to make their own money.

 

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“Greenbacks” were paper currency issued by the U.S. during the Civil War.

 

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“Greybacks” were paper currency issued by the Confederate States of America during the Civil War.

 

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7 tons of ink is used to print money every day.

 

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There are 293 ways to make change for $1.

 

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A bill can be folded 4,000 times forward and backward before it will rip.

 

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The motto “In God We Trust” first appeared in 1963.

 

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The bird on the silver dollar was a real eagle named Peter.

 

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Coins can last an average of 30 years in circulation.

 

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One million $1 bills would weigh 2,040.8 pounds, while one million in $100 bills would weigh only 20.4 pounds.

 

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The slang “buck” comes from times before paper money when Americans would trade buck animals for goods and services.

 

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The U.S. officially adopted the dollar as its unit of currency in 1785.

 

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The U.S. went off the gold standard (currency is backed by gold) on August 15th, 1971.

 

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The only number on a coin is the year it was minted.

 

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There are between 7.5 and 9 billion $1 bills in circulation at any given time.

 

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The motto on the first U.S. coin was “Mind Your Business.”

 

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Nickels are more expensive to make than dimes.

 

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The clock in the steeple of Independence Hall on the back of the $100 bill is set to 4:10.

 

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North Korea is the greatest culprit of counterfeit American currency.

 

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Today’s pennies are made from 95% zinc and coated in copper.

 

 

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The total outstanding U.S. consumer debt is currently $3.9 trillion.

 

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Thirty-seven percent of all households carry some sort of credit card debt.

 

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One in five Americans have a zero or negative net worth.

 

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Gambling in the U.S. brings in more revenue than theme parks, sporting events, cruise ships and music combined.

 

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Ninety-six percent of Americans will not be able to retire by age 65.

 

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The total amount of outstanding student loan debt hit $1 trillion in 2012.

 

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The average new car loan is now more than $30,000.

 

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The average American will pay more than $600,000 in interest over their lifetime.

 

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Twleve percent of the money taken home by the average American family is spent on interest.

 

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Forty-seven percent of Americans cannot cover a $400 expense without borrowing money or selling something.

 

 

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Whew!

What a list of money facts. The founding fathers would be proud.

While the majority of our articles seek to impart deep and profound finance knowledge, we thought we’d change things up a bit for the election by compiling 101 fascinating money facts for you to peruse and do with what you will.

Hey, at least you’ll be able to clean up on Jeopardy night!

Talk about Money Learned.

 

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