Starting Out in Life with Debt
Many people enter adulthood with more debt than they expected. Students are graduating from four-year colleges and universities owing an average of more than $23,000 for their education. They may also have thousands of dollars in credit-card debt. If you wonder how you can pay your bills as you start out in life, you have a variety of options. Starting out in life with debt is a big challenge, whether you have to repay a student loan or a credit-card company. Student loans can’t usually be discharged by filing for bankruptcy, and if you fail to pay what you owe, your lender may garnish your wages and take the money out of your paycheck. Out-of-control credit-card debt can hurt your credit record and keep you from buying a house or car or reaching other financial goals.
If you are starting out in life and have debts, the best way to avoid problems is to know exactly what you owe and to develop a realistic plan for repaying it. Here are some tips:
- Know what you owe. For each debt, create a file or folder that has the name of your lender or creditor, the account balance, and the status of your loan (including when you must start repaying a student loan if you don’t yet have to do this). You’ll need the information to explore your options for repayment. If you don’t know what you owe, ask your lender/creditor or consider pulling your credit report(s) from www.annualcreditreport.com (order by phone at 877-322-8228). For student loans, you can also visit the site for the National Student Loan Data System (NSLDS). If your student loan doesn’t appear on the site, you may have a commercial or nongovernment loan. Your school can tell you how to get an update on it.
- Explore your repayment options. You may have more options than you know. For example, the relatively new Income-Based Repayment Plan may help if you don’t earn enough to pay the monthly minimum on a student loan. Search the site http://studentaid.ed.gov for “IBR” to learn more. Visit the “Repaying Your Loans” section of the site to learn about extended-payment and other options.
- Get help if credit-card debts are unmanageable. Consider talking with a credit counselor, who may be able to negotiate with your creditors for a workable repayment plan. You can find a no-or low-cost debt counselor in your area through the National Foundation for Credit Counseling, 800-328-2227.