Escaping College Debt
Students often go into debt to get a college education. Tuition, fees, and living expenses all add up while many students have little time for work.
For most students, a college education is well worth it. College graduates will likely earn a million dollars more in a lifetime than high school grads. Mean income for college grads is $52,462 according to the College Board, versus $28,816 for high school graduates.
However, for recent graduates, it can be a very difficult time financially. The National Project on Student Debt reports that most recent college grads have about $19,000 in student loans. Pile on the estimated $2700 in credit card debt that the average student graduates with and it creates a heavy burden.
Many recent graduates are not yet in a position to earn substantial income when they begin their first job out of college. A few feel the need to give the outward appearance of success and therefore are willing to overspend. After just a couple of years, credit card debt can really start to become a more substantial percentage of your expenditures.
Even raises and promotions sometimes fail to keep up with the demands of paying ever higher credit card debt. Debt payments steadily increase as many try to improve their standard of living. A nicer apartment and car bring substantial increases to expenses.
The key is eliminating that credit card debt early. It will end up costing you plenty in the long run. Suppose you are trying to buy your first home, but have $10,000 in credit card debt. Imagine getting married and trying to explain to your new spouse that you owe a third of your annual salary on credit cards.
A total balance of $2700 may not seem like much, but neither does that snowball at the top of the mountain. They key to building wealth is letting your money work for you. If you fail to eliminate this debt early, you will be working for it instead. You must make a decision to do this now, or it will only get tougher later on.
The best approach is to limit your spending on plastic. It will allow you to realize what you have to work with on a monthly basis and to make accelerated debt payments. Keep sending in as much as you can without sacrificing your emergency savings. The goal is independence from short-term credit. Once you have made some progress by paying down at least $500 of your balance, call your credit card company to request a lower interest rate. This could allow you to pay down your balances even faster.
If you find that you are unable to make higher payments and are in danger of falling behind, seek help from a reputable credit counseling organization. Getting help now before you wreck your credit can help you get back on your feet and on your way to a solid financial future.