Millennials' college debt has reached the level that more than 30 percent of debtors surveyed by MyBankTracker say they would be willing to sell an organ in order to repay their loans. In a time where young people are leaving school saddled with copious amounts of debt, recent grads can use all the financial tips they can get.
As such, we've got four pieces of solid advice just for millennials both before and after they've started their student loan repayment plans:
1. Make a good budget.
Making your way in the world today takes financial resiliency. For millennials just starting off after school, it seems that the world is taking everything they've got, and also a little extra. To help America's youth combat tough times, the most important piece of advice from wealth management experts the world over is to get a grip on finances from the start by developing good budgeting habits in college.
Beginning to understand what you're up against can really help you get ahead even before you've graduated from college. If your parents help you manage your debt, developing an interest in the subject or attempting to involve yourself in the loan process as much as possible can be very beneficial to your knowledge base and overall financial future. This will give you a leg up in the short term as well. With student loans set to kick in typically six months post-graduation, you'll have proper planning strategies already in mind to pay off your debts.
"More than 30 percent of millennials would sell an organ to eliminate debt."
Take time to fully comprehend what your post-graduate monthly payments will look like. For instance, $25,000 worth of student loan debt earning interest at 6.8 percent with a 10-year payback period would cost $288 a month. According to Allan Katz, certified financial planner and president of the Comprehensive Wealth Management Group in New York, paying $700 a month instead of $288 enables the borrower to repay the loan in just over three years, according to Bankrate.
2. Repay as much as you can, as soon as you can.
Most private and government-sponsored student loan payments will kick in six months after graduation. This time frame is designed to give recent grads the time they need to find a job and earn a bit of cash before making loan repayments. However, with more millennials lacking full-time work after graduation than in previous generations, this grace period might not be long enough.
Instead of immediately getting a job and putting money down on their first home, many millennials are wisely choosing to live at home for a few extra months. This can allow them to repay their loans more quickly, without rent payments to worry about. According to Forbes contributor Nick Morrison, millennials able to pay more than the minimum amount can pay off debt faster in the long run. The key takeaway is that you'll save more if you're able to repay more of your debt faster, by way of saving more money right out of graduation.
3. Negotiate your finances across the board.
Lots of millennials starting out are bashful when it comes to negotiating their salary. This is understandable, when you consider that as of May 2015, 13.8 percent of millennials were unemployed, according to Newsweek. Even a few thousand dollars per year now could result in big savings later in life.
"An extra $5,000 a year can add up to $500,000 in extra earnings over the course of your lifetime," said Lauren Lyons Cole, a financial planner based out of New York, as reported by CNBC. "So it's far easier than cutting coupons, or trying to budget. It's a really good way to impact your bottom line."
"When shopping around for a loan provider, try to find a fixed rate."
When originally shopping around for a loan provider, or perhaps looking to take out more for graduate school, try to find a fixed loan rate. Without a fixed rate, interest tends to expand every year, which could result in your debt totaling more than you had planned for originally. If you're already paying off your loans, you might consider consolidation. Consolidation simply lumps all of your debts into one big account, versus smaller accounts gaining interest individually. This can sometimes result in long-term savings, and may be a worthy option to pursue.
4. Earn while you learn.
If you've taken out student debt, probably the best tactic is to get ahead of the game by working your way through school. This may be far easier in graduate school, which is typically tailored more for working professionals by offering night classes. Even savings from part-time work can have huge results, according to Bankrate.
For more information about smart ways to manage your finances, contact Landmark Bank.
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