When students graduate from college, they’re hit immediately with bills from various angles. Consider the fact that the average college graduate has over $3,173 in credit card debt alone! On top of that, the national student loan debt average is approaching a historic high of $30,000. While students can eliminate unbearable credit card payments through bankruptcy, there is little room for forgiveness with this type of debt.
What’s even worse is that the United States economy has yet to fully recover. In fact, the unemployment rate for new college graduates is just short of 11 percent and it’s also reported that wages have decreased approximately 3.6 percent across the nation. Coupled with these statistics and rising student loan debt, young adults are finding themselves in a precarious situation. Since filing for bankruptcy won’t alleviate loan pains, it’s crucial for young adults to manage their money wisely.
How to Budget for Student Loan Debt
Student loan debt payments have a long-term effect on credit history, budgets, and quality of life. By incorporating these tips, current college students and new graduates will be able to manage their debt before it gets out of hand. These tips can also be applied to other debts such as credit card debt to avoid financial troubles. Young adults should:
- Anticipate upcoming expenses. It isn’t enough to simply plan for debt payments. Consider the entire picture including car, rent, groceries, leisure, and any other expenses. For young adults still in college, now would be the good time to begin saving for a down payment on your future apartment or car. By worrying about it now, you can focus on student loan debt later. Saving for anticipated expenses also allows you to pay in cash instead of putting it on a credit card, which will protect you from the need for bankruptcy.
- Maintain strong communication with lenders. If you know you’re going to miss a payment or are in a financial hardship, it’s better to contact your lender and ask for a deferment, forbearance or other options than to miss a payment.
- Avoid paying student loan debt with a credit card. For many young people struggling financially, there is the temptation to pay bills with a credit card. However, this only pushes off the eventual payment instead of actually paying it. Credit cards tend to have aggressive interest rates that accumulate quickly. Paying student loan debt with a credit card isn’t a solid money management strategy and could lead to further financial trouble down the road.