If you’re a recent college graduate who wants to move forward and start life in the “real world,” but student loans have you shackled, you’re not alone. Total outstanding student loan debt in the United States is approximately $1.6 trillion, causing significant hardship for many new borrowers.
If you’re lucky enough to find employment after graduation, a large chunk of whatever bit of disposable income you have left will likely be eaten up by student loan payments. Once the excitement of graduation has dissipated and reality settles in, it will be time to face the steady stream of student loan bills. A recent Bankrate.com survey found that roughly 56% of millennials with current or past student loans have put off major life events because of overwhelming debt. This is compared to 43% of older adults.
Putting the future on hold
The three major purchases most likely to be put on ice are purchasing a home, saving for retirement, and buying a car.
“Student debt is often portrayed strictly as a millennial issue, but the truth is that Americans of all ages have put their lives on hold due to student debt. Delaying major life milestones such as buying a home or saving for retirement doesn’t only affect the individual and his or her family; it also has ill effects on the overall economy,” said Steve Pounds, Bankrate.com analyst.
Additional survey findings:
- 56% of millennials with current or past student loans have put off major life events because of their debt.
Educational debt has caused 43% of older adults to delay life milestones.
- More than 50% of all student loan borrowers say they didn’t receive enough information or advice about the financial risks of taking on education loans.
- Just 28% of 18- to 29-year-olds have ever had student loan debt, compared with 41% of 30- to 49-year-olds.
Lack of information
Many borrowers say they did not receive adequate advice when it came to managing their loans after college. Millennials were the most likely to have this complaint (66%).
“Most families are not advised through this process. The decision to take on this debt is largely made based on the fact that this is the only way to pay. The key is to plan properly, early, so that you can reduce the amount of debt you are taking [in]the first place,” Allan Katz, president of Comprehensive Wealth Management Group, told Bankrate.
Tips for surviving financial life after college:
1. Don’t rush to move out
Stay with your folks as long as you can so that you can save up at least six to eight months of emergency funds and have a cushion in the event that you lose your job or face some other unexpected event. Using credit to bridge the gap during an emergency will only dig you much deeper into debt. Cash should be your first line of defense in an emergency.
2. Establish excellent credit
Make an effort to focus on paying your bills each month on time and in full. Establishing a good credit history now will help set the stage so that when you are ready to purchase a home, you will be able to get the best rates on a mortgage.
3. Educate yourself
Learn as much as you can about how finances work. Learn about the stock market, basic credit management, and the basics of insurance. Now is the time to build your knowledge so that you can hit the ground running once it’s time to live on your own.