Our newer generations of kids emerging into society today are unlucky enough to be apart of an economy full of debt. More than ever, those lucky enough to graduate from college have more debt than they will be able to pay off with mounting interest from student loans and credit card bills due to low paying jobs that are available after graduation.
For those who do not go to college and those who do, life is still more expensive than it was for those who emerged into the job market from past generations. The result of this costly economy has left most with mounting debt that they have to deal with to pay their essential bills. The Covid-19 pandemic has complicated matters even more for high school and college graduates looking for jobs. Unemployment numbers have reached an alltime high, and even those who had jobs lined up before the pandemic started may have lost those opportunities due to the economic shit down.
What do you do as a recent graduate or newly employed kids trying to make it in this costly world we live in. There are things you can do to help yourself get out of debt and finally on the path to financial freedom.
-Save a small amount from each paycheck to build a savings account.
Even when things are tight, setting a budget to save a small amount per paycheck will build over time. Having a savings account will allow for unexpected costs that come up in life. Keeping a safety net like this will stop you from having to put unforeseen expenses on credit. Anything you can do to stop you from spending on credit cards and not being able to pay them off will help prevent the pattern of mounting debt. Saving this money can also help with paying off current debt and help you get your head above water.
If you already have debt and it is in good standing, you may be getting offers in the mail for balance transfers to other credit lines. This is a good option for those who have credit lines with revolving balances and high- interest rate credit cards. If you do a balance transfer, you can consolidate all your monthly payments into one for a low fee. For a promotional amount of time, you can often get a 0% interest rate, or a very lower rate compared to what you are currently paying. The catch with this is that you have to pay off the amount before the promotion is up, or it will change back to a high-interest rate. The good news with this is that if you can’t pay off the line of credit before the rate period expires, you can often transfer it again to a new line of credit for a new promotional rate and time period.
-Payment Negotiation For Federal Loans or Deferment
For many college graduates, student loan payments can be suffocating. During the pandemic, most federal student loans have been put into forbearance until September. If you have loans that have been frozen, for now, you should have received a letter stating that the loan was frozen. Make sure you are aware of when the payments will be due again. You can apply to extend the forbearance if you need to when the time is up, and you are still under financial hardship, but you will need to qualify financially.
It is essential to know that there is help when it comes to federal loans. You can call to negotiate the amount you need to pay each month based on your current income. If you can prove that you don’t make enough to cover the cost of the payment, they will often negotiate the payment amount with you to something you can afford. The other option for federal student loans is to apply for deferment. If you can prove financial hardship and show that you cannot currently make payments, they will often defer your payments for an agreed amount of time. The downside to this is that the interest will continue to accrue during the deferment period, just like when you were a student.
-Pay Ahead on Student Loan Interest Rate
It is essential to think about what will happen with your student loans after you have graduated. Many students take exorbitant loans while they are students, and don’t think about how they will make the payments with the high-interest loans when they graduate. If you plan while you are still a student, and pay the interest while as it accrues, you will have much lower payments when you graduate. The total to that point will only be the principal amount since the interest is paid off. This often makes a big difference in the long run for recent graduates.
Many Millennials today have debt that they are making the minimum payments on, and it is not making a dent in their debt. One option is to take out a debt consolidation loan. This will make it, so you only have one payment each month, and it will often have a lower interest rate than what you are paying on your current debt. It will also help your credit score to pay off all or most of your existing debt with the loan and keep it all in good standing
This last option is for those who have fallen behind in their payments and now have debt in collections. There is no need to file for bankruptcy, no matter how much debt you have in collections. The best way to stop the collection calls and fix your credit is to negotiate the debt amount and set up a new payment schedule with lower payments. Once a debt goes into collections, it is often purchased by third party debt agencies. This allows for the debt amount to be negotiated to pennies on the dollar. If you don’t feel comfortable settling your debt, there are companies who will call and negotiate for you. Please be aware that this option is only for those with debt that is already in collections. Do not let any debt negotiation company tell you to stop paying your bills. This will hurt your credit. Make sure only to use this option if you already have debt in collections. Settling will help your credit in that case
Millennials today do not have it easy when it comes to entering the economy, getting a job, and building an independent life for themselves. They often find they are in debt and not flourishing the way they thought they would when they went out on their own. It is important to remember that even in the current economy, there are ways to help yourself reach financial freedom and get out of debt.