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Dealing with Debt
Junior and Senior Class Center Tips on...
Dealing with Debt

While we know youre excited about getting a fresh start upon graduation, we also know that, unfortunately, you may
be making that start with considerable debt. School loans accumulate, credit card bills amount, and new expenses, like
a work wardrobe, apartment and furniture costs are pending. The credit ratings you are building now will stay with you
for a long time, so its important to pay attention to how youre spending your money.

Paying back school loans
If you have school loans, be aware that your payments start six months after graduation. Keep in mind that
interest on your loan is continuing to accrue during those six months, so it may be a good idea to begin paying
something during that deferral period if you can.
Lenders offer several ways for you to pay off your loans. The most common is a standard payment plan, where
you pay a consistent amount for 5-10 years. Graduated payment allows you to pay less at the start, with you
payment amounts increasing over time. However, you do wind up paying more interest with this method.
Finally, there is income sensitive repayment, where the amount you pay is determined by the salary you make.
Many lenders also offer incentives to make automatic or timely payments, so look for every option to reduce
your interest rate.

Paying your way out of the debt youve already accumulated
For those of you with credit card debt, your first goal after college should be to pay this off as quickly as
possible before amassing any additional debt! Finance charges can eat you alive (No, were not just being
dramatic!). Do you know that if you have $3,500 on the average credit card at age 25, and you never charge
another penny but only pay the minimum payment each month, you wont pay off that $3,500 until you are 65
years old! During that time youll also pay almost $9,500 in interest. Credit card debt is a serious issue.
Educate yourself on how credit cards calculate interest. Then, check the interest rate on your credit cards.
Find the lowest rate card you can, transfer your balances to it, and cancel your high interest cards. Try to keep
just one of two credit cards and eliminate all others. It will help you keep closer tabs on your balance.
If you are behind in your payments, call your credit card company to see if they can help you out. Companies
will sometimes waive late fees or lower interest rates if it will increase the likelihood that they will get the
money they are owed.
If you feel you are in more trouble than you can negotiate yourself, you may also want to consider using the
resources of organizations that help consumers get out of debt, like Consumer Credit Counseling Services
(CCCS). For a very nominal fee, they will negotiate with your creditors on your behalf, helping you become
debt free.
For more tips on getting out of debt, check out the link
http://www.federalreserve.gov/pubs/shop
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includes helpful strategies and links to many other organizations and sites designed to get people out of debt.

Staying away from trouble with debt
The first tip is the one we gave above. Keep only two credit cards to help you keep a handle on your debt.
Second, pay off your balance every month. You should use your credit card as a substitute for carrying cash,
not as a way to spend more than you make. In other words, use your card only for convenience. Never charge
something you cant pay for with cash.
Use a debit card. Those are the ATM cards that you could use like a credit card, but the money comes directly
out of your checking account. Set up a system to save your receipts and record them later. A debit card is
especially useful for paying for small items that tend to add up quickly and unnoticeably.
If you must make a big purchase, work out a plan on how to pay it off before you buy it, or better yet, save for
a couple of months and pay cash. Remember the sale advertised this weekend may not be such a good deal
when youre paying finance charges for months on your bill. There will be another sale after youve saved your
pennies and can pay for that item up front.
See also:
Debt-Free by 30: Practical Advice for the Young, Broke, and Upwardly Mobile, by Jason Anthony and Karl Cluck