Debt sucks. And debt after college sucks even more.
I remember when I was a freshman and I first signed the promissory notes and handed off the co-signer forms to my mother. I had no idea what I was doing. I had convinced myself that going to school and getting a degree would secure my future of having a fabulous, wealthy career—and paying for that degree was NOT going to stop me. Having some debt after college was just a fact of life. Obtaining loans was like brushing your teeth in the morning—a necessary nuisance that in the end was worth much, much more than the inconvenience. And then came graduation… six months later, and still jobless and broke, the grace periods ended and the bills came. And years after that, I’m still just barely hitting the premium. The truth is that debt is a fact of post-college life. And for many college students, credit card debt is yet another bump in the financial road. Unless you are one of the lucky few whose parents stacked away the bucks for your education, chances are you had to borrow—and a lot—for your college education. Whether or not it was worth it is really determined by your willingness to make it so. If you piss away your time at college partying and skipping class, then perhaps you will be paying for the next twenty years for four brief years of fun. But if you genuinely learned and experienced college—even if the job search is slow and discouraging—then in the end, the price was not unreasonable. And you can’t discount the many priceless takeaways a college experience provides… friends, memories, and in my case, a husband!
The first step to handling your college debt does not involve consolidation loans or lottery tickets.
It’s all about state of mind. For me, it took a sincere effort to realize that the debt wasn’t going to magically disappear. And even if I landed my dream job, the debt would still remain a reality for years to come. The fact is, if you borrowed thousands of dollars for school, it’s going to take time to pay it off. You may be paying off your debt after college for ten, twenty years from now. Accept it, deal with it, and most importantly, get over it! Your debt is not your life. It’s an inconvenience, yes. But there is no debtor’s prison, and if you can’t make your payments, most loan companies are willing to work with you if you’re honest with them. But the first challenge in coming to terms with your debt is not worrying or wasting your youth obsessing about the fact that it exists. With proper budgeting and planning, you can easily maintain a happy, fulfilled life and still make your loan payments—even on a meager income.
The second step is to do your homework.
As boring as it sounds, you will be much better off if you understand your debt and add up the numbers. Read your loan statements. Calculate your monthly payments. Carefully choose your repayment plans. Know your finance charges, interest rates, and pay-off dates. If you simply read the paperwork that is supplied to you, making decisions about further consolidation and budgeting will become a no-brainer. If for you, like many college students, credit card debt added another layer of responsibility, be sure to include those numbers in your calculations.
It sounds pathetically simple, but figuring out your monthly expenditures in relationship to your monthly income can mean the difference between a $35 late fee and a $35 tab on a night out with friends. I don’t know about you, but I’d prefer to spend that money on gin-and-tonics! Or a movie! Or a lottery ticket, for that matter! It may sound absurdly easy, but sit down with a notepad or make a Google Docs spreadsheet and write out every single expense you make per month. Even factor in $20 or $40 bucks for household expenses like laundry and toothpaste. Add it up, and then figure your income based on your weekly income, any additional funds (freelance work? tips?) multiplied by 4.33 weeks in a month. If you don’t know exact numbers for your income, give a low estimate. Compare your expenses to your incoming cash flow, and adjust accordingly. If you are barely earning enough to make ends meet, then it’s time to go job hunting. If you already are job hunting, then you’ll need to read my tips for surviving on zero income. If you’re paying the bills on time, then relax! What’s the worry?
Debt Consolidation – Is it worth it?
There are always options for debt consolidation, but there are no perfect answers. Everyone’s situation is different. When I married my college sweetheart, our combined student loan debt after college was over $130,000!!! We could have bought a house with that money! So we opted to consolidate. Be very careful before consolidating your loans because there are many companies that are eager to convince you to consolidate, but at an interest rate that hardly justifies the convenience. The truth is, if you look at your interest rates, it may actually be cheaper to keep your original loans for their life. Don’t just jump into a plan without doing the math, and also keep in mind that for the most part, federal loans are much easier to consolidate than private loans. We ended up consolidating our federal loans, and keeping the private loans as they were. For us, it means SEVEN monthly payments! But it’s actually cheaper than any consolidation loan we could ever acquire for that amount of money. You could save a couple thousand in interest if you don’t mind the inconvenience of having to send out a few extra payments.