Six things graduates can do to mitigate loan debt

The statistics have become more alarming with each passing year loan.

Currently, more than 70% of all college graduates carry student loan debt into the next phase of their lives. Americans now have more than $1.4 trillion in unpaid education debt, according to the Federal Reserve. Trillion. That’s 1,400,000,000,000.

Students graduating today can expect to spend the next two decades of their lives paying down their collegiate debt. In fact, according to a study from the OneWisconsin Institute, it takes graduates of Wisconsin universities 19.7 years to pay off a bachelor’s degree and 23 years to pay off a graduate degree.

Fortunately, there are things a graduate can do almost as soon as he or she tosses their mortar board into the air to help mitigate student loan debt.

First, consider putting that graduation gift money to good use by investing it in a Roth IRA.  Even $500 accrues handsomely if you invest it early enough in your career. You also can use your graduation gift money to begin making payments on your loan.

Most loans allow a grace period after graduation, but that doesn’t mean you have to use it. Interest accrues during grace periods and it’s much better to start knocking down your debt as quickly as possible.

Second, choose your next step with care. Consider the options for housing and transportation when you weigh job offers. Also, look at the overall cost of living and how that might affect your social life. The average monthly payment on a student loan in 2017 (for borrowers aged 20 to 30 years) was $351. That’s a sizable chunk to factor into a monthly budget.

Third, if it fits with your long-term employment plans, consider a job (like Teach for America) that offers some form of loan forgiveness. It is important to note, however, that you may have to pay income taxes on forgiven loans.

Fourth, take advantage of available apps to set up a reasonable budget and then stick to it.

Fifth, consider getting a part-time job and direct deposit that money to your loans. If you don’t have any loans, invest the extra money in a Roth IRA.

Sixth, weigh carefully your decision to take out more loans for graduate school. If you believe this additional education will provide enough of an income boost to pay off your loans sooner, go for it. However, if you’re thinking about going to graduate school because you aren’t sure what direction you want your career to head and you’re trying to buy yourself some time, don’t do it. In that case, you may be setting yourself up for a loan snowball that will affect you the rest of your life.

It’s not too early to sit down with a financial advisor. Call us today. We’ll be glad to meet with you, or to host a seminar for you and your friends.