Addressing Your Student Loan Debt After Graduation
Grads Start on Road to Success with an Average $19,000 in College Debt
SAN MATEO, Calif., June 27, 2007 - By mid-June, thousands of new college graduates have been launched into adult life -- and for the two-thirds of them who owe an average $19,237 in student loan debt, Bills.com co-CEO Brad Stroh offers eight suggestions for paying off that debt and start down the road to financial success. "The great news is that most graduates have a six-month grace period to plan their strategy," said Stroh, who also co-founded Bills.com, a free online consumer portal that helps consumers save money. "That is just enough time for grads to get their feet on the ground and start their financial lives on the right foot with careful planning." Stroh's suggestions include:
- Get a job. Landing employment is job one, Stroh pointed out, as positive cash flow is key to any plan that includes paying off student loan debt. Fortunately, according to the National Association of Colleges and Employers, businesses anticipate hiring 17 percent more new grads this year than last. Meanwhile, graduates should confirm the six-month grace period before loan payments begin.
- Pay on time. "We can't reiterate it enough: Paying bills on time is the No. 1 way to save your credit rating and save money," Stroh said. "It's more important than ever, as a late payment on one account can send interest rate and payments skyrocketing on all your other accounts." The track-record you establish early on will follow with you throughout your life, so start strong out of the gates.
- Pay credit card debt. In addition to student loans, many new graduates have credit card debt. Because credit card debts typically carry extremely high interest rates (typically 15-30 percent), there is no better investment than paying down this debt as quickly as possible. "If you have extra money to dedicate to debt, prioritize repaying debt with higher interest rates first," Stroh suggested.
- Get repayment help. Some professions have perks that include student loan repayment, whether in monthly assistance, one-time payoffs or matching funds. "Check into programs offered by your employer or field," Stroh said. "If you qualify for one of these programs and don't take advantage of it, you are effectively turning down free money."
- Take tax benefits. Most new graduates can deduct up to $2,500 per year in student loan interest payments. The deduction phases out for taxpayers with annual incomes between $50,000 and $65,000 ($100,000 to $130,000 for those filing joint returns). Work with a tax advisor to be sure you get all the education-related deductions and credits for which you qualify. Stretch your dollars as far as you can
- Consider consolidation - with care. Student loan consolidation can be beneficial if you are cash-strapped. Consolidation can lock in a low fixed rate, extend the duration of the repayment period (up to 30 years), and lower the payment - sometimes cutting it in half. Remember though, to build wealth over your lifetime, you need to pay off debt as quickly as possible, so carefully examine the terms. Seek student loan consolidation quotes.
- Pay more if possible. Additional payments are permitted on most student loans. More payments mean faster freedom from the loan. If consolidation has extended the loan's term significantly, try to pay additional funds each month to eliminate the loan down faster.
- If you can't pay. "If you cannot pay your loan, immediately call your lender," Stroh cautioned. "Lenders would rather work with you than risk a defaulted loan. And your credit rating will do better if you postpone payments for a while than if you default." Damage from defaulting can prevent borrowers from buying a home or car or getting a job, apartment or insurance for years to come. If total debt is insurmountable, seek help from a reputable debt resolution advisor.
With these eight tips, new graduates will have the tools to make the right decisions on their student loans - and more quickly get on the road to debt freedom. When that happens, you will know you've truly arrived. That achievement just might feel even better than the glow you feel as you look at your diploma today, as you’ll be graduating onward to financial freedom. Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at /. Since 2002, Bills.com and its partner company, Freedom Financial Network, have served more than 15,000 customers nationwide while managing more than $350 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.