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Congratulations! You’ve just completed an important milestone in your life.
So now it’s time to face reality. What will be your next step? If you had financial help along the way, it won’t be long before those you owe come knocking.
The student loan debt won’t pay itself, and lenders have little sympathy for recent college graduates with limited or no income. So, you’ll need to quickly figure out how to take care of monthly obligations once the repayment period starts.
Perhaps you also have credit card debt? Have those outstanding balances also spiraled out of control?
Here are a few helpful tips to consider when managing your debt:
1. Do the math
In other words, know what you owe, or it will be impossible to develop a practical debt reduction plan. To get organized, Forbes suggests you:
Compile a list of all your loans, including the name, Web address and contact information for the lender, the loan ID number, the current loan balance, the interest rate and the date the first payment is due. FinAid’s Student Loan Checklist can help you organize this information. Put all correspondence for each loan into its own file folder, labeled with the loan ID number.
2. Come up with a plan of action
Once you have determined how much you owe, create a realistic spending plan that allows you to take care of monthly obligations, including student loan and credit card debt. That way, you will have a plan for every dollar, even before it hits your bank account.
When listing projected expenses, remember that living in the real world is a lot more expensive than college life. Rarely will you find all-inclusive housing. Also, don’t expect a free meal when your stomach starts to speak to you and your pockets are shallow. It may be a little tough to adjust, especially considering all the new bills. But hang in there.
If you are starting off with a decent salary, be careful not to exhaust all of your income each month. Instead, save for a rainy day and allocate any additional disposable income to outstanding debt balances.
What if you graduated debt-free? Save as much as you can because you never know when hard times or new opportunities that require a little cash will come your way.
It is possible you could enter the workforce and decide a particular career path isn’t for you. With a little cash to fall back on, you can afford to take some time off to explore other options, relocate or even start a business.
4. Move in with your parents
You may cringe at the thought of leaving your newfound life of freedom and moving back home. But such a move may not be a bad idea if your parents are willing to welcome you with open arms.
Not only will you have more time to prepare for the real world, but you’ll also be able to save a little cash.
5. Don’t be tempted by new offers
After graduation, don’t automatically aim for a more luxurious life — unless you have lived in the real world for a while and are debt-free, with a nice cushion in the bank.
As a new graduate, it is highly unlikely this describes you. So avoid the new-car payment and the many credit card offers that come in the mail. Even if you land a sweet gig, you may find you’re a horrible money manager, or simply can’t really afford a ritzy lifestyle after all.
6. Keep up with your payments
Sign up for automatic withdrawal so you don’t fall behind on student loan payments. According to Forbes:
Not only does this save you on postage and the hassle of writing a check each month, but education lenders often give borrowers who make their payments by auto-debit a small interest rate reduction, typically 0.25 percent or 0.50 percent.
If you miss a due date or the account becomes delinquent, you could be hit with late penalties and a rather large ding to your credit score.
Don’t wait until you are drowning in debt before asking your creditors to work with you. If you’re desperate, student loan consolidation may be an option.
If you are saddled with credit card debt, inquire about a balance transfer to a new card that offers an enticing promotional offer. Or, see if your existing issuer will lower the annual percentage rate and agree to a restructured payment schedule.
8. Steer clear of more student loans
Graduate school is tempting, especially if the job market is dry. But you will only end up with more debt. The other loans won’t go away; they’ll just continue to grow.
Sure, you will have earned a second degree. But you’ll be right back at square one unless you’ve managed to land the job of your dreams before graduation.
9. Take care of yourself
It’s never wise to forgo health insurance to make ends meet. Sign up for health insurance at your workplace.
If it’s not offered there or you’re unemployed, inquire if you’re eligible to purchase health insurance through HealthCare.gov. Even though open enrollment has ended for most people, there are exceptions that may make you eligible. Or perhaps your parents can add you to their plan.
10. Pick up a part-time job
Are you going through the interview process or still waiting to hear back from prospective employers? While waiting, get a part-time job that provides flexibility to search for more lucrative opportunities and brings in a little income at the same time.