COLLEGE STATION The diplomas have been framed, the caps and gowns put away, the luggage has been packed. For thousands of new college graduates, it’s time to leave behind the last few shreds of childhood and fully plunge into the workaday world.
Unfortunately, many of these students start out their news lives loaded with old debt. And it may be the first time in four years they’ve considered what that means.
Alan Pontious is scheduled to graduate in May 2003 from Texas A&M University with a degree in philosophy. His goal is a career in foreign relations with the U.S. State Department.
He also expects to have somewhere in the neighborhood of $20,000 in student loans to pay off when he graduates, but he’s not sure of the exact figure.
However, he’s not too worried about it either. “I don’t really (worry about it) now because a lot of graduates will spend that much on a new car,” Pontious said. “I’m pretty happy with what I have.”
His student loans are an investment in his future, Pontious said. “I justify that by thinking I need to (take out loans) and I’ll pay it off when I’m working full-time after I graduate.’ I’m not working (full-time) while I’m in school because that would distract me from what I need to do to graduate.”
That’s the attitude recent graduates should have when it comes to student loans, said Nancy Granovsky, Texas Cooperative Extension family economics specialist. Student loans should be considered more an investment in the future, she said, and less a debt for the past.
But that doesn’t mean these debts can be ignored for four years.
“One of the things students can do especially as they wind down their college careers and the prospect of starting to repay student loans looms large is contact the financial aid office of their college or university for assistance in reviewing their student loan history,” she said.
“They are going to have to do an inventory of where the money comes from while they are going to school and who they will owe once they graduate.” But while they are considering student loan debt, students and future graduates need to understand that student loan debt is not what causes so many financial woes after graduation, Granovsky said.
When credit card debt is added into the equation, things really become tricky.
“Be cautious about (running up) credit card debt because the interest rate is so high much higher than student loan rates (of interest),” she said. If students or recent graduates do find themselves surprised with a heavy financial burden, Granovsky suggested, there are some steps they might take. “As soon as they are employed, they need to work out a monthly budget to start paying back their debt,” she said. “They have to figure out how to manage within the money they have.”
First, she said, figure out what how much money will be needed each month to cover expected expenses for rent, for utility and telephone bills, for food, for loan repayments, etc.
If monthly income doesn’t stretch far enough to cover monthly expenses, Granovsky said, consider cutting costs by: (1) getting a roommate; (2) postponing major financial decisions, such as buying a new car; (3) getting help from parents if at all possible; and (4) moving back home to defray expenses, if doing so looks workable.
However, recent graduates who don’t yet have jobs might have to take more direct steps, Granovsky said. “Let your creditors know you don’t have a steady source of income negotiate (how bills will be paid).
“And don’t use plastic to fill in the gaps,” she said. “The interest rates are too high. It’s too easy to spend money you don’t have.”
Pontious said while he’s lost track of the exact amount of his student loans, he’s never lost track of the fact that payback is coming. Because of this, he’s learned to live college life to the fullest without running up enormous expenses. “I keep my expenses low,” he said. “I don’t go out shopping hardly, and I try to be cheap with everything.” He has recently paid off his car loan, which was a goal for him.
His advice for students and/or future students who know they will have to have financial help to get through college:
– “Have realistic career goals so that you can pay off loans with ease.”
– “Don’t use credit cards unless you absolutely have to and pay them off as soon as possible.”
– “Keep a good credit rating.”
“And don’t sweat the small stuff. Have a college life but keep in mind that nothing is for free.”
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