Advice for young graduates to better manage their debt


Our youngest son graduated from high school today. The other morning I asked him, “What are the most important things you learned in high school?”

“Well, daddy, in the story I learned that the Sotheby’s auction house sold a 200 year old piece of Tibetan cheese for $ 1,513 in 1993. And I learned that the letters in Woods from a Scrabble game are Vermont maple. “

“That’s it?” I asked. “That’s all I remember,” he explained.

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My daughter then intervened: “Daddy, wait until he goes to college. He will learn that more than 14 cubic meters of air passes through the nose of the average person every day.

“I can’t wait to pay for this education,” I said.

Post-secondary education is expensive, and many students graduate with thousands of dollars in debt. Today I want to share some thoughts for students heading into post-secondary education or who have recently graduated and who may not understand how to manage their debt.

1. Borrow carefully. If you are borrowing for your education, base the total amount you borrow on your ability to repay it after you graduate. Follow the “rule of ten”: for every $ 10,000 of student debt, you should be able to earn $ 10,000 on a basis of $ 10,000 per year to be able to pay off that debt in 10 years. For example, if you graduate with $ 50,000 in debt, you should be able to earn $ 50,000 on a $ 10,000 basis, for a total of $ 60,000 per year to pay off that debt over 10 years.

2. Create a budget. During school and after graduation, make sure you understand where your income is coming from, how much, and where it is going. Track your spending for at least three months. By using an online service such as will make it easy. Next, make sure that your disbursements, including debt payments, are less than your income. If you go to and type “budget planner” in the search box, there is a great planner that makes it easy to create a budget.

3. Choose a period. When you have student debt, or any other debt for that matter, make sure you have a goal for when you would like it paid off. Ultimately, you have to keep up with regular payments, so your time horizon will depend on your income level. For student loans, I think 10 years or less is an ideal time frame. For a home loan, there’s a good chance that it will take more than 20 years to pay it off, but you can speed it up by making payments every two weeks rather than once a month, and lump sum payments. periodicals against the mortgage if you have additional cash and the terms of your mortgage allow it.

4. Pay off some debts first. Your student loans usually offer tax relief in the form of an interest tax credit, so you’ll usually want to pay off your other debt sooner. Loans with the highest interest charges make the most sense (credit cards or payday loans come to mind), but don’t underestimate the value of paying off smaller loans quickly, as it does can give a sense of accomplishment and motivate you to pay off other debts more quickly.

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5. Work with your creditors. If you get to the point where your debts are becoming a real financial burden and causing you stress, contact your bank or other creditors and talk to them. Ask them to consider lowering your interest rate or extending your payments over a longer period to reduce your monthly payments if necessary. For student loans, consider applying for the Repayment Assistance Program (RAP), which can reduce or eliminate your monthly payments.

6. Consolidate your debts. It may be a good idea to pay off several high interest rate loans at once with one debt consolidation loan at a lower interest rate. You may be able to go from multiple payments per month to just one and reduce your total monthly debt payments. This could allow you to spend the extra money on paying off other debt or saving. For student loans that qualify for the Student Loan Interest Tax Credit, you should avoid consolidating these loans or you will lose the opportunity to claim the credit.

7. Avoid more debt. If the accumulation of debt is a problem for you, consider closing certain revolving credit accounts once paid off (credit cards for example). If you’re hoping to borrow for a home or business, having a good credit score will be important, and while having a good credit history is important, avoid the temptation to apply for too many credit cards or credit cards. ready. The more applications you fill out, the more desperate you seem for credit and the worse your credit score gets.

Tim Cestnick, FCPA, FCA, CPA (IL), CFP, TEP, is author, co-founder and CEO of Our Family Office Inc. He can be reached at [email protected].


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