How to prioritize your post-graduation debt - KCTV5 News

How to prioritize your post-graduation debt

© Adam Gault / Digital Vision / Thinkstock © Adam Gault / Digital Vision / Thinkstock

By Andrew Housser

Flowers are blooming, birds are singing and graduation caps are flying. Each spring, 3.5 million U.S. young people graduate from high school. Nearly 3 million more receive an associate’s or bachelor’s degree. 

With the celebration comes a painful reality: Today, the average college graduate owes more than $37,000 in student loans, which they will begin repaying at about $300 a month. Many new grads will soon establish their own households and begin managing their finances – a phase sometimes called “adulting.” How well they manage their money can have long-lasting effects, from their credit scores to their ability to buy a home or car in the future, or even get a job. 

To help new grads “adult” more effectively, here are six essentials to prioritizing and managing money and debt. 

Pay on time. No matter what debt and what bill you are paying, pay on time, every time. On-time payments account for more than one-third of your credit score. One tactic to make sure you pay on time is to set accounts up to automatically pay the minimum amount due. That way, bills will not slip through the cracks. You can go back and pay more – which should be the goal – at any time.

Eliminate credit card debt. More than 50 percent of college students have at least one credit card. That statistic does not mean that every new grad is ready for a credit card, though. The average credit card interest rate is about 16.5 percent. People who have little credit history – such as new graduates – are likely to pay higher rates. If you are a new grad with a balance on your credit card, work to pay it off as soon as possible, and ideally before you must begin making student loan payments. Then commit that you will pay your credit card charges in full each month.

Stay on top of student loans. Most student loans have a six-month grace period after graduation before regular payments begin. During this period, review your loan programs and options. Some professions have programs that help repay student loans, whether in monthly assistance, one-time payoffs or matching funds. Those who work in professions like teaching or public service might qualify for loan forgiveness. Most people can take an income tax deduction of up to $2,500 per year in student loan interest payments. Some qualify for options such as income-based repayment plans or consolidation. Above all, if you think you will have trouble making payments, contact your lender to ask about alternative arrangements.

Be careful about taking on vehicle debt. Diploma in hand, you may be bombarded with auto loan offers. Manufacturers and dealers often offer new graduates cash back, special financing and no-money-down deals. Remember, though, that the less you put down, the more you will pay over time. The average monthly payment on a new car is about $500. Consider such a payment carefully. If you forego buying a new car, you could repay student loans much more quickly. You would also save thousands of dollars in interest payments on that car.

Start an emergency fund. An emergency fund will help you avoid rushing to a credit card for unexpected expenses. Deposit monetary graduation gifts in a savings account dedicated as an emergency fund. With each paycheck, contribute as much as possible – ideally 10 percent. Build this emergency fund to cover at least six months of basic living expenses.

Save for retirement. Accumulating funds for retirement may not directly figure into current debt payment. But it will help assure a more financially stable life in years to come. As hard as it may be to contribute to retirement savings while paying off student loan or other debt, your future self will thank you for doing so. Enroll in your employer’s retirement plan or open an individual retirement account (IRA). Get into the habit of investing 10 percent of your income toward retirement. For example, if you saved $100 per month, earning 6.5 percent annual interest, your balance would grow to more than $320,000 over 45 years. 

Finishing school is an accomplishment. Celebrate your achievements by setting out on the next step of your journey – the journey to financial success. By getting ahead now, your future becomes even brighter.

Andrew Housser is a co-founder and CEO of, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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