Drowning In Debt? Five Tips For College Students And Recent College Grads
Are you a college student or a recent graduate? Chances are you're saddled with a hefty amount of student loans as well as consumer debt, like car payments and credit card balances. Two-thirds of undergraduates emerge from college with student loans, with the average amount from federal loans alone (Stafford and Perkins loans) just above $19,000. Throw graduate school into the mix, and those numbers get even scarier.
Some students and graduates have already learned how to make smart borrowing decisions and manage their debt. Others are in for a rude surprise - it can take years to get out from bad financial decisions you made before you even started your first real job.
That's a pity, because one of the main reasons for going to college is to invest in yourself, to increase your earning power down the road, and to open doors for yourself. If you make stupid financial decisions while you're in college and as you transition into the working world, you're squandering your big investment and limiting your choices. Think money gives you freedom? Not if it's borrowed and badly managed. Why close doors on yourself?
Whether you're still in school or have already graduated, keep these rules in mind as you make borrowing and spending decisions.
1. Smart debt vs. stupid debt
Not all debt is bad. Student loans, for example, are a smart investment if you invest that debt in the right program and do well there. When is educational debt bad? When you're wrecking your transcript because you're out partying all the time, for example, or you borrow for a school or a degree that won't enable you to pay that debt back.
Even smart student loans need to be managed wisely, however. Your tuition and school fees are fixed costs, but you have a choice to make about every dollar you borrow above and beyond that amount to finance your lifestyle. Every dollar you borrow to live on your own instead of sharing space with a roommate, to eat out instead of feeding yourself, to buy the latest and greatest video game systems or cell phones, to go out drinking, and to have someone paint your nails is stupid debt. Don't get me wrong - I love a yummy restaurant meal as much as the next person, but don't borrow in order to have those things. If you borrow stupidly, you'll find yourself living a lot less glamorously after college than you did in college. Who wants to move backwards like that? Consumer debt is stupid debt.
Borrowing to fund illegal or addictive activities is also stupid debt. If you find yourself "having" to borrow in order to pay for alcohol or internet gambling (the latter is also illegal in many states), you have bigger problems to worry about than just your finances. If you can't stop doing either of those things to preserve your financial health, you need help quitting. Now.
2. Know how much you can borrow
If you're still in the planning stages, use the excellent calculators and resources at FinAid.org to figure out how much student debt you can manage.
3. Paying off debt
If you find yourself with different kinds of debt, pay off any consumer debt before you pay more than the minimum monthly payment on your student loans. Compare the interest rates you're paying on your various balances - pay down the debt with higher rates first.
4. Pay your bills on time
Many of the college students and recent grads I interact with are bad about paying their bills on time. You've got to treat your bills as sacred, because even one late payment will show up on your credit report and lower your all-important FICO score, a number derived from your credit report that summarizes your credit-worthiness. You want that number to be as high as possible, ideally above 700. The lower your score, the more money you'll pay to borrow.
Who looks at your credit report and FICO score? Everyone from credit card companies to educational lenders to prospective employers to landlords to mortgage lenders to car and health insurance companies. Get a free copy of your credit report at www.AnnualCreditReport.com, and pay the small additional fee to find out your FICO score.
5. Think hard about grad school
Many college seniors who aren't sure what to do after graduation rush off to graduate school (often law school, because that admissions process requires neither work experience nor a specific undergraduate curriculum). More often than not, their parents are also pushing them into grad school. Big mistake. Graduate school, especially law school, is expensive. It will set you back six figures and three years of lost work experience and income, all for a career that most applicants know nothing about. Go out and experience the working world before you commit to a particular graduate program. If you think your current student debt is scary, imagine how much more indentured you'll be with an additional six figures of debt. If you're going to make that kind of investment, make sure it's a smart one. Grad school isn't going anywhere. You owe it to yourself to learn more about what you want out of a career, and out of life, before committing to a particular track.
Your first few years in the “real world” after college are going to be full of new and challenging experiences. You don’t want the financial decisions you made as a college student to restrict the choices you have in the working world. Making an effort to get a handle on your debt as quickly as you can gives you a head start on repaying loans and building a sound credit report.
About the Author :
Career Expert, Anna Ivey, is the Former Dean of Admissions at the University of Chicago Law School and author of The Ivey Guide to Law School Admissions. Currently, she advises young people as they navigate life after college, helping them make life path decisions - career, graduate school, etc. Visit http://www.annaivey.com or contact Anna at anna@annaivey.com.
Article Source: www.iSnare.com
Haunting Student Loan Debts
In today's ever changing economy, it's hard enough for the average working individual to make ends meet, without a wage garnishment, while supporting themselves or their families. Sometimes living pay check to pay check with the regular bills and sudden unexpected expenses is hard enough without having an old student loan debt rear its ugly head to bite you in the wallet. Borrowers who have not made voluntary and timely payments to the institution from which a loan was made, may face a wage garnishment through their current employer. Under the Higher Education Act, the Department of Education and security agencies can require employers to deduct a minimum of 10% of the indebted employee's pay check each pay period toward repayment of the debt. This wage garnishment may continue until the entire balance of the outstanding debt is paid. This method of wage garnishment is used only for the borrowers who refuse to voluntarily repay their defaulted loan and is not used with those borrowers who continue to make regular and timely payments.
Employers who have received an Order for Withholding of Wages must conform to the order by law. Employers will only receive information that is necessary to conform with the wage garnishing order and are prohibited to discharge the borrower from employment, or subject the individual to disciplinary action due to wage garnishment. Any individual who is discharged from their job or disciplined is allowed to seek restitution in federal or state court if such action occurs. Administrative Wage Garnishment is a tool of last resort used by the U.S. Department of Education to recover defaulted student loans through wage garnishment. Thirty days prior to the issuance of the Order of Withholding, a notice is sent to the borrower notifying that individual of the Department of Education's intent to garnish wages and of the borrower's rights and appeal procedures.
To avoid wage garnishments, the borrower has an opportunity to enter into a written agreement under terms agreeable to Department of Education to establish a voluntary repayment arrangement. If the borrower has any objections to the existence, amount, or enforce-ability of the debt, a hearing can be arranged to present and obtain a ruling; also of any objection that wage garnishment of the borrowers disposable pay would produce an extreme financial hardship. A wage garnishment action can be withheld by filing a timely request for a hearing. No action will be taken until the hearing is completed and a decision is issued.
Borrowers may also object to a wage garnishment if the validity of the claim is in question or if the current enforce-ability of the claim is barred by law. The borrower is responsible for providing documentation or evidence to corroborate any objections raised in defense to the enforcement of the debt. It would be in your best interest to learn all you can about garnishment law.
About the author:
Henry Byers, Retired IRS Manager and IRS Wage Garnishment expert - focusing on State Garnishment and Wage Garnishment
Items covered in this site:
A student loan debt consolidation loan allows you to combine your federal student loans into a
single loan with one monthly payment. The repayments of a student loan debt consolidation loan
can be significantly lower than the payment required under the standard 10-year repayment option.
For American students, the U.S. Government came up with a plan that can help a student manage
their student loan debt. The plan they came up with is called a Federal Direct Consolidation
Loan. It doesn't matter if you're a recent graduate student, well into your career already,
still at school, or in your grace period for repayment of a student loan. For any of those
student categories, a Federal debt consolidation loan may be applied for.
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