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Keep College Debt From Crippling You Further: Tips For New Grads On A Tight Budget

two men shaking handsAlthough there are many ways that student loans are jeopardizing our future, that does not mean we should take it lying down. If you graduated from school with a lot of college debt, you know that you only have 6 months of freedom before the bills start coming in. After that, you can expect a decades worth of student loan payments that will eat up your hard earned money.

As bad as that may sound, it is not as alarming as the current situation of our student debt crisis. According to the NYTimes.com, as the mortgage and credit card debt delinquencies go down, the student loans continue to rise. But even as more and more people fail to pay their college debt, the loans are still being distributed without really improving the system that will determine repayment capabilities.

This scenario leads to a tough beginning for our new graduates. It is not unlikely that a lot of them are forced into a tight budget that will keep them from grabbing financial opportunities. If you are a new graduate and you can relate to this problem, then you should know that there is a way for you to keep your student loans from endangering your future. That being said, let us discuss the three important things that you need to look into so you can achieve financial independence.

How to set up your budget to pay off your student loans

First is setting up your budget. If you never heard or used this while you were in college, this is your wake up call. One of the reasons why you are in debt is probably because you failed to budget your money.

If you did not know, budgeting is another way to get out of debt. Regardless if you are currently employed or still looking for a job, you may want to start working on this budget before your college debt bills start knocking on your door. Here are some tips for you to set up a budget plan on a tight budget.

  • Determine your frugal budget. This basically means you have to know the amount of money that you need to have to pay for your most basic necessities. Think of it as your baseline budget. When we say basic, that means food that is eaten inside the house and prepared by you. While you may not like the sound of frugality, you really have no choice about it. Besides, you do not have to use this – at least not yet.

  • Think of what else you can cut. Setting aside your baseline budget, look at your other expenses and see what else you can cut back on. Do you really need to have a mobile plan or will a prepaid plan serve your communication requirements? Is that gym memberships really necessary or can you terminate that and just utilize what you can exercise on for free? If you think that your parents will not mind, check if you can move back in while you are trying to strengthen your financial position. You will still contribute at home but at least, it will not be as costly as when you are living on your own.

  • Work on a source of income. If you are still looking for a full time job and you are finding it hard to land one, settle for a part time job or some freelance work to get by financially. You can do online jobs or you can continue the college part time jobs that you used to have. If you are lucky enough to look find a job at this point, scrutinize your income to see how your trimmed expenses measure up to it.

  • Create a budget that give you a lot of room for your college debt payments. Consider your baseline budget, the expenses that you can cut back on and your income. Then, you need to look at your student loans and determine how you can maximize the money that you will contribute to your debts. This is when you decide if you should implement your frugal budget plan or not.

Build up your emergency fund despite the huge loan payments

After working on your budget, you need to turn your eyes towards your emergency fund. Most new graduates do not have an emergency fund because they know that they still had the financial support of their parents. But now that you have graduated, that is no longer the case. You need to start asking the basic questions that will help you compute your emergency fund target.

An emergency fund is important because it will help tide you over the difficult times without putting yourself in debt. You should not wait for the unexpected before you start thinking about your reserve fund. Here are some tips for you to build up your emergency fund despite the college debt that you have to pay and your limited budget.

  • Set realistic goals. No matter if your goals are big or small, it can really help you focus and also raises the chances of your meeting your targets. Think about the amount that you want to save up for and come up with a plan to meet that. Use your budget as reference of what you can and cannot afford.

  • Tell others about your plans. It can be a close friend, your special someone or your family. When you tell someone about a goal that you want to reach, the embarrassment of failing is one motivation that will push you to reach your goal.

  • Adapt a cash only policy. Given your limited resources, you want to make sure that you will never go beyond your budget. Adapting a cash only policy will ensure that you will not spend beyond your means.

  • Put aside money – even if it is small. Do not be discouraged if it turns out that you can only save a small amount at a time. Saving dimes is better than nothing. Soon, that money will grow bigger – at least if you stay true to your savings.

  • Look for a part time job. In case you already have a job and it is still not enough, you may want to get a part time job. We’ve mentioned freelancing as an option that you can do. Why not explore that option.

  • Sell the stuff you do not need. If you have postponed it until now, you should start thinking about selling the things that you had in college that you do not need anymore. Anything that you get from the sale has to go to your emergency fund – 100%.

  • Do not forget your tax refund. According to an article published on Forbes.com, there are 1 million taxpayers who failed to file their tax returns. This makes them unqualified to claim their tax refund. The current unclaimed tax refunds in 2010 is $760 million. The article mentioned that most of the people who failed to get their tax refund are students and part time workers. This is your money so make sure that you can claim it.

Tips to pay off your student loan debt

Once you have your set up your budget and started on your emergency fund, it is time for you to focus your attention on demolishing your student loan debt. In fact, this should never be put in the backseat. Before you commit to a home loan or a car loan, you need to seriously pay down your college debt first.

Here are 5 things that you need to know to help you pay off your student debts.

  • Know your loan. Find out how much you owe and who you owe it too. Keep track of everything especially when you have a lot of lenders. You do not want to get confused and fail to pay one lender.

  • Know your finances. You need to review your budget and find out the maximum amount that you can use to pay your monthly student loans. Remember that you need to pay more as much as possible. A college debt payment usually goes to the late charges, then interest rates and last on your principal debt amount. If you pay more than the required amount, you get to eat up a portion of that principal amount.

  • Know your options. It is also important to know your payment options like the pay as you earn or income based repayment plan. You will know more about these options if you visit StudentAid.ed.gov. Make sure you get a repayment plan that your current income can afford.

  • Know your rights. If you landed in the right industry, you may be qualified to avail of the Public Service Loan Forgiveness program.

  • Know where to get help. Being a new graduate will make you feel disconcerted at some point when it comes to your finances. This is the time when hiring a professional to help you out can really make a huge difference in your pursuit to pay off your college debt.

If you need any assistance with your student loans, National Debt Relief has a federal student loan product that provides consultation services to consumers who are burdened with college debt. This service includes the analysis of the consumer’s financial, student loan and employment situations. The company will then advise the consumer on what program they are qualified to use to pay off their debts faster. The service includes assistance in preparing the documents that will help borrowers enter the appropriate program. The service charges a one time flat fee that is secured in an escrow account. National Debt Relief will not withdraw this amount unless the consumer is satisfied with the paperwork done on their behalf. This performance based payment means that if the consumer does not get into a program, the company will not get paid. There is no maintenance fee or any upfront fees to be charged to the consumer.

How To Prepare For School Year 2014-2015 College Costs

books with a mouseWere you aware that college costs rise faster than the inflation rate? The increase of higher education costs rose to 4.8% in 2012 – more than double of the inflation rate that is only around 2%. This is the reason why a lot of students are thinking about skipping a college degree to avoid the inevitable student debt. Some of them opt to go straight to the blue collar workforce that will give them a lower income – but will keep them from the bonds of debt.

As the overall student loan balance rises, you may be wondering about the future of college education. Will it still be worth it to be in debt during the first 10 to 15 years of your work life for a chance to earn more monthly income? Apparently, some colleges want you to think so.

Before we can throw stones at these heartless college institutions for continually raising tuition fees, you need to read the 2012 article from the Associated Press website.

According to the AP Big Story, there are some colleges who have heard the cries of the student population and are willing to provide them with a bit of reprieve. Some of them offer a tuition plan that will freeze their rates for 4 years. These fixed-rate tuition fees will allow families to budget for their student’s school expenses. Others went a step further to offer a lower fee for the school year 2012 to 2013. The total number of colleges who did this in the last school year involved 320 universities and colleges all over the country.

The main benefit of having a fixed tuition is the student gets to analyze and anticipate their overall college costs. By having a figure to target, they will know how much they need to raise to add to their savings. They should be able to decide whether they need to get a student loan or getting a part time job will help pay for the shortage.

The real cost of getting a higher education

Whether you are an incoming college student, coming back for another year or going to a graduate school, the first step to prepare financially is to understand what you are paying for. Do not just accept the amount that the school will give you. It is very important that you do not rely on the myths of college costs and you should scrutinize what you are paying for in school.

But what exactly is the real cost of going to college? More importantly, why does it cost a lot of money to get a higher education?

In 2011, Richard Vedder, a professor of economics in Ohio University and the director of the Center for College Affordability and Productivity released an article through the CNN website. Together with Matthew Denhart, the Center for College Affordability and Productivity administrative director, he discussed various issues that makes college very costly.

The article published through the Edition.CNN.com provides the following insights about college costs.

  • The country’s higher education structure needs a reform to address the rising cost to go to school.

  • Colleges and universities lack the incentive to improve administrative processes to help lower their overhead cost.

  • A college or university president is viewed to be successful if they take care of the needs of the faculty, alumni, trustees and key administrators or politicians. This makes them prioritize earning more off the students through tuition fees than to make sure more students can enter the school.

  • Some of the Ivy League schools are trying to be “selective” to raise their status as providing the best education. They turn away qualified students so their elite status can allow them to raise their tuition fees.

  • Since the faculty is important to the education of the students, schools bribe them with high salaries and low teaching tasks.

  • The alumni that provide the school with some funds are appeased through intercollegiate athletic programs that bring pride and bragging rights for the school. These programs are oftentimes very expensive.

  • The presence of student loans do not help regulate the prices of the schools. Since students can borrow money anyway, there is no need to make schooling more affordable.

  • Students must learn how to measure their chances to earn profit against the tuition they are paying to get that privilege. It has to be measured in accordance with the industry their degree will fit into, the overall job market conditions and the rising cost of living.

  • A more transparent way of college spending must be enforced so schools will be more cautious of how they spend their money.

  • College tuition fees cannot rise faster than the income being offered by the corporate world.

These points help shed light to the many improvements that must be implemented to make college costs more affordable. Obviously, the need to get education is there. We just have to work on reforming the current system.

How to save a couple of hundred a month to help finance college expenses

While there is nothing that we can do at the moment to lower college costs for the next school year, the task is left to the students and their parents to make college more affordable. Here is a video from CNN where Christine Romans provide a helpful advice to keep student loan debt down.

You really have to take seriously the bad effects of student loan debt. You want to make sure that you save up enough money to help finance it. If you are still in high school or you have a child that is about to go to college, you can target to save a couple of hundred dollars every month to add to your college fund. $100 every month will help save you $1,200 a year. $200 will save you $2,400 and so on as so forth.

Here are some tips to help you save up for college costs.

  • Bundle your cellphone plan. Some companies will provide you with an all inclusive plan on your phone that will provide you with unlimited calls, text and even Internet access for only $40. This will save you $60 a month since usual cellphone fees amount to $100 a month. That can save you $720 a year.

  • Let go of your gym membership. The average cost of a membership is $10 a month. Although this is a small amount, it is still $120 a year. You can jog or use the community gym to get in shape.

  • Do your own nails. The average cost of a manicure and pedicure can amount to $25 to $30. If you get one every week, that can cost you $100 to $120 a month. If you learn to do your own nails, you can save up to $1,440 a year.

  • Be cautious about using a card for purchases (even debit or ATM cards). The average charge is $2.60. If you swipe your card once a day, you waste $18.20 a week. That is $72.80 a month. If you use cash instead, you can save up to $873.60 a year.

  • Get rid of the cable. A cable subscription can cost you $100 a month. That is $1,200 a year. If you have an Internet connection, just opt for this and let your cable go.

If you do all of these saving tips, you can slash $362.80 from your bill. That can total to $4,353.60 savings a year. If a parents starts to save for their childs tuition when they start high school, the 4 years before college can help them save up to $17,414.40 before they go to college. With the average student loan amounting to $24,000, you only have a few thousand to finance. The $7,000 can be something that the college student can earn by doing part time jobs.