In the U.S., most college students these days carry more than a heavy class load –they also carry a significant amount of debt.
It’s undeniable that a college education in the United States has become increasingly more costly for families and students. The numbers are staggering. The average college student is now around $22,900 in debt at graduation. In fact, according to the Wall Street Journal, the class of 2011 graduated this spring with a dubious distinction: the most indebted ever.
Couple this with a challenging job market and it’s not surprising that many recent graduates are overwhelmed at the mere thought of paying off student loans while trying to launch their careers. To help, we’ve put together 9 tips to help you tackle college debt:
- Complete exit counseling upon graduation. Use the time wisely and work with your financial aid advisor on fully understanding your payments and your debt load.
- Utilize repayment calculators to determine what your monthly payments on your loans will be. This will help you establish a budget that will allow you to make those payments and keep the debt in perspective.
- After you graduate you will typically have a six-month grace period before you will need to begin paying off your loans. During this time period you will likely be inundated with mail from your student loan providers. Don’t make the mistake of simply ignoring the letters because you are overwhelmed. Take the time to read them and seek out help if you don’t understand.
- Explore the options of consolidating your loans. You will likely have more than one loan when you graduate. Combining these loans into one consolidated payment is not only simpler but often leads to lower monthly payments. Some of the lenders who offer consolidation are Chase, Direct Loans, Next Student, Student Loan Network and Wells Fargo. Look into these options, but shop smart. Study the terms and fees and then make an educated decision about whether loan consolidation is right for you.
- When your grace period is over, make it a priority to begin paying off your loan. If you fail to repay your loan you will soon be faced with a number of negative consequences, such as garnished wages, offset federal and/or state income tax refunds and other payments.
- If you are unable to find a job and are not financially able to begin making payments on your loans you have options. One such option is deferment or forbearance, which allow for postponement of payment under select circumstances. Most people know federal student loans can be deferred if you enroll in graduate school or the military. But you can also get a deferment for unemployment or economic hardship. While this will result in some repercussions, they will likely not be as damaging as if you consistently make late payments or go into default. Talk to a financial advisor and work with your student loan provider to determine if this is the right move for you.
- As you become more established in your career, consider making more frequent payments on your loans. Even a small amount can make a difference.
- If you are carrying other debt in addition to your student loans, focus on the higher-interest debt first. It is crucial, however that you continue making your payments on student loans, too. (See #5)
- If you find yourself in a situation where you are unable to make your payments, address the situation immediately. Reach out to your lenders to see if they are willing to work with you. Avoiding the problem will only cause more troubles in the future. The key is to communicate with your lender.
About the author: Kim Ross is Second Vice President/Retail Managing Officer at MidWestOne Bank. She works with MidWestOne customers to help them manage their personal finances and identify effective money management solutions.