Delt Stories

Student Loans: Hated by all and feared by many. Lots of people have them, and if you were lucky enough to leave college unscathed by them, you deserve a big high-five. As scary and terrible as student loans may be, in just under a year most all of us will have reached the end of our six-month grace period and will be stuck with a monthly payment, reminding us of the great time we had over the previous four years. This week I was challenged to meet with a financial advisor, so once I graduate, I can be on top of things, financially speaking.

The video above gives some insight into my meeting and a few of the points my advisor and I talked about, but I want to reiterate some of her points and provide some extra help in the areas she described as important.

Student Loan Info

• When you graduate, all of your student loans can be consolidated. This means they will be rolled into one big loan and will have all the same interest rates and payments will all go to one place. If you have done all of your loans through the government, this is generally the best option. To make sure it is the right option for you, check out http://studentaid.ed.gov/repay-loans/consolidation for some more information on loan consolidation and what to think about before deciding.
  
• Make sure to choose a payment plan that works for you. A popular option for recent college grads is a graduated payment plan. It will start out with low payments and increase over time to higher payments. This works well because your salary will generally increase with time as well.
  
• If you put your student loan payments on an auto-pay system (have it draft directly from your bank account) you receive a 0.25% discount off your monthly payments.
  
• Student loan debt does not count on your debt-to-income ratio. This means it does not affect your credit for when you go out and want to buy a car or rent an apartment or apply for a credit card. Other types of debt (credit card, car loans, etc) do count, so make sure to minimize those, but the student loan debt won’t affect you there.
  
• Make sure to set up a plan where you are paying as much on your student loans each month as you have available within your means. Everyone wants to get them paid off quick, but make sure that other bills and necessities aren’t being neglected so you can pay your loans off quicker. On the flip side of that, don’t draw it out longer than it needs to be. You have a six-month grace period, but if you are able to start paying before that…DO IT! You don’t have to wait until six months has passed to get started.
  

Other Financial Info:

• Create a personal budget. You may have already done this throughout college. If not, graduation is a great time to start. You will be a “real” adult and as such you should have a good handle on your finances. When putting together a budget, make sure to include all expenses (rent, utilities, car payment, insurance costs, cell-phone, gas, food, entertainment, student loan payments, etc). To get started, check out http://frugalliving.about.com/od/moneymanagement/a/Budget_Form.htm for a good starter format. More budgeting tips can be found at http://www.kiplinger.com/columns/drt/archive/2003/dt030626.html.
  
• Keep savings. In my meeting with my financial advisor, she advised me to always keep 2-3 months’ worth of expenses in savings. This is important in case you lose a job or something happens to where you have no income for some time. A good time to save for this emergency fund is during your six-month grace period. It may sound silly now, but if you come to a point when you need something to fall back on, you’ll be glad you put money away.
  
• Think about investment options and retirement funds. My financial advisor recommended to me looking into opening a Roth IRA account. I know you are probably thinking that age 22 is a little bit young to start thinking about retirement, but there are quite a few benefits that can come out of pre-planning and opening a Roth IRA account. Before you jump into it, I would definitely recommend meeting with someone more knowledgeable than me, but in the meantime, feel free to check out this site that explains some of the details: http://newgradlife.blogspot.com/2009/10/why-roth-ira-is-perfect-savings-account.html.
  

Those are just some of the things I was able to pick up in my meeting. Hopefully passing them along can help you out too. Best of luck with the coming semester and the impending job hunt!

Oh, and check out this article too; it mentions some of the things I already did but adds a few other tips for graduating seniors… http://www.forbes.com/sites/financialfinesse/2012/05/09/12-financial-tips-for-debt-burdened-new-grads/.