Congratulations, college graduates! You’ve just completed an important milestone in your life.
Now it’s time to face reality. 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. So, you’ll need to quickly figure out how to take care of monthly obligations once the repayment period starts.
Here are a few helpful tips to consider when managing your debt:
1. Do the math
Know what you owe, or it will be impossible to develop a practical debt reduction plan. Free online tools like FinAid’s Student Loan Checklist can help.
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 before it even hits your bank account.
When listing projected expenses, remember that living in the real world is a lot more expensive than college life. 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.
For example, it is possible you might 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. Be sure to ask if they would like you to contribute to household expenses, however.
5. Don’t be tempted by new offers
After graduation, don’t automatically aim for a more luxurious life. Avoid the new-car payment and the many credit card offers that come in the mail.
Even if you land a sweet gig, you might find you’re a horrible money manager and need to fall back on savings. Or, you might simply realize that you 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.
If you miss a due date or the account becomes delinquent, you could be hit with late penalties and a 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 might be an option. Also consider enlisting a reputable professional to handle the negotiating for you.
If you are saddled with credit card debt, consider transferring the balance to a new card that offers an enticing promotional offer. You can use the Money Talks News credit card search tool to explore options — select “Intro Balance Transfer Rate” from the pull-down menu to filter the search results.
Alternatively, see whether your existing credit card issuer will lower the annual percentage rate or agree to a restructured payment schedule.
8. Steer clear of more student loans
Graduate school is tempting, especially when the job market is dry. But you will only end up with more debt if you return for more education. 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. Plus, as long as the Affordable Care Act, aka Obamacare, remains the law of the land, having health insurance is a legal requirement with a fee for those who don’t purchase it.
Sign up for health insurance at your workplace. If it’s not offered there or you’re unemployed, you’re probably eligible to purchase health insurance through HealthCare.gov or your state’s insurance marketplace. Even though open enrollment for this plan year has ended for most people, there are exceptions that may make you eligible for what HealthCare.gov calls a “special enrollment period.”
Or perhaps your parents can add you to their plan. Under the ACA, parents generally can keep children on their health insurance until they reach age 26.
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 to bring in a little income while you search for more lucrative opportunities.
Do you have tips to help new graduates manage debt? Share them below or on our Facebook page.