managing post-graduation debt

Remember how good it felt to get accepted into your college of choice, arrange financing, so you could afford to attend and, eventually, receive that degree for which you worked so hard? Congratulations on accomplishing all that. Now comes the hard part — paying back the loans that enabled you to set sail on your career.

Don’t feel as if you’re all alone in that predicament, though. According to the Federal Reserve Bank of New York, at last count, 43.4 million Americans had student-loan debt totaling $1.63 trillion*. For borrowers ages 20 to 30, the average monthly payment is $351. The median payment is $203. That’s a big obligation for a young person just beginning a career — too big for some, it turns out: 5.7 percent of borrowers are delinquent in their payments. The average Class of 2023 graduate owes $39,400 in student loans. Most undergraduate students complete college with eight to 12 loans; graduate students have twice that.

The trouble is that unless you are starting out in a job that pays extremely well, that $351, or so, is compounded by a beginner’s salary and a host of new expenses, including two big ones — housing and a car. Landlords sometimes require a deposit of the first and last month of rent, increasing your immediate outlay of cash. Experts say these perilous waters can be navigated, however. Caution, forethought, and self-discipline must be constant companions and unwavering shipmates.

Here are some pieces of advice to calm the rough waters:

• Get all loans organized, and payment dates put onto a calendar. Start repaying as soon as you can. Some loans offer up to six months to get your feet squarely grounded. Many delinquencies result from this delay — out of sight, out of mind, presumably. Get used to consulting your calendar frequently and having all obligations carefully entered.
• You may be smart to consolidate student-loan debts. Making one payment is certainly easier than making many, and it is surely less likely to overlook one than many. This option could be complicated by having both public and private loans, all with different interest rates. Consolidating federal loans typically does not save you money. Loans from a private lender can be arranged to your advantage, however. Making punctual payments will over time raise your credit score, which suffered during college because your debt was building. Be judicious in how you consolidate, however. Some student-loan-repayment plans attach surprisingly low interest, but they may be of surprisingly long duration, which will cost more via duration of as much as 20 or 25 years. Examine all avenues thoroughly and choose a course that will be your most advantageous.
• Look into whether your employer has a loan-repayment-assistance program. Many do these days. This is particularly true of public-benefit employers, who use such incentives to overcome their inability to pay competitively high salaries. Public Service Loan Forgiveness programs may also be available to some employees to help repay student debts at low interest. However, they require you to have made 120 payments on your Federal Direct loans while working in a qualifying public-service position. If conditions are met, you could receive 10-year forgiveness.
• While repaying your loans, don’t fail to claim the student-loan interest deduction every year. On your federal income-tax returns, you can deduct up to $2,500 a year in interest paid on both federal and private student loans. You don't need to itemize to claim this benefit.
• Do not fail to make payments according to the loan agreement. Your credit score will be damaged and cost you more in debts of other kinds. Default will increase your costs even more than the obvious one of elongating the payment period because up to 25 percent of the amount you paid can be put toward collection charges, meaning it will not be subtracted from your debt. If, in the worst case, you were ever forced into bankruptcy, student loans would almost never be discharged even by that drastic strategy. If the loans are federal, the government has wide leverage in collecting, such as by garnishing your pay, taking income-tax refunds, seizing lottery winnings or blocking renewal of professional licenses.
• Build a fund of at least $1,000 and, ideally, up to six months of salary to keep making student-loan and other debt payments should you become unemployed.
• Choose a modest-enough lifestyle, at least at the outset, to accommodate loan repayments. A cheaper car, a less luxurious apartment, taking on a roommate to save on rental costs, forgoing cable TV, taking a second job (remember that side jobs not only bring in more money, they occupy time that may otherwise have been spent on spending) — all are options for young people still trying to eventually achieve a lifestyle that includes debt control.
• Consider carefully if you are tempted to go back to school out of frustration with your situation. Graduate school could enhance your earning prospects, but it almost certainly will increase your debt.
• Create a budget for yourself and stick to it. Try to avoid credit card spending, and, if you can’t, pay the monthly bill promptly to avoid finance charges. Interest rates on credit card debt are typically higher than most other kinds of loans. Keep in mind that the discipline you apply now will someday soon pay off in a cash-flow environment that will give you comfort and widen your options.

For most young people these days, a college education is what a high school education was a generation or two ago. Unfortunately, unlike most high-school diplomas, a college degree comes at a high cost. The political world is whirling in talk about the federal and/or state governments paying for college, as local taxpayers pay for public secondary schools, but, so far, the talk hasn’t yielded concrete plans. As long as these extreme costs fall to the student, debt upon entering a career seems unavoidable. But the debt can be managed, and the degree will turn out decidedly to be worth the investment.