People who graduate from college in 2008 had an average student loan debt of $23,200, according to a new report from the Project on Student Debt. In some cases, student loan debt consolidation could be helpful.
High Unemployment for College Graduates
With a high rate of unemployment, many graduates have faced a tough time finding jobs to begin paying back their student loans. The unemployment rate for college graduates was 10.6% in the third quarter of this year. Some graduates have questioned whether it was really worth it to go to college and end up deeply in debt.
Consolidate Loans for One Payment
If you are among those struggling to pay back students loans, here are some things to know about debt consolidation. Student loan debt consolidation allows you to combine several loans into one. A debt consolidation loan should give you a lower overall interest rate and more affordable monthly payments. Some consolidation loans actually extend the repayment period to give you lower monthly payments.
Federal vs. Private Student Loan Consolidation
Federal student loans must be consolidated separately from private student loans. There should be no advance fee required when you consolidate federal loans. Avoid any lender that asks for money upfront to consolidate loans.
Student loans taken out by students and parents can be consolidated, but not together. Married couples must take out individual consolidation loans instead of combining their debts.
Compare Debt Consolidation Loans
You can choose any lender to consolidate your loans. So shop around to find the best interest rate for debt consolidation. Some lenders have stopped making consolidation loans because of the tough economy but there is still help available.
Student loan debt usually won’t be discharged if you file for bankruptcy. So if you have a lot of debt it’s best to find a solution such as debt consolidation that allows you to pay the money back and avoid damaging your credit score.
Fitch ratings reports that credit card defaults (defined as delinquencies of 60 days or more) reached near record levels during October, for an overall default rate of 4.41 percent. Citing unemployment as the primary cause for struggling debtors skipping payments, Fitch suggests that debt burdened consumers may have a way to go before economic and labor concerns wane. In these uncertain times, eliminating credit card debt is a critical aspect of debt management and financial planning.
Credit Card Debt: Holiday Season Can Create Problems
It can be tempting to fill your wallet with credit cards and head out to the malls or to your computer for online shopping. Instead of invoking the shopper’s battle cry of “Charge!” take control of your finances by creating a cash based budget, putting the plastic away, and planning your holiday shopping.
Your Morning Latte and Your Cash-Based Budget
It isn’t realistic to expect consumers to give up all of their pleasures, but cutting back is an important part of paying off your credit card debt. Having a latte now and then isn’t likely to sabotage your budget, but it is important to save for emergencies, other unplanned expenses, and your future. When developing your cash based budget, don’t forget to include monthly contributions to savings and retirement accounts. Having savings can help avoid a major plastic meltdown when your car needs a new transmission or your dog breaks a leg.
Shopping Trips and Traps: Don’t go without a Plan
- When you go shopping, always have a list, and next to each item on the list, pencil in a spending limit.
- Leave your credit cards at home. Carry a debit card or checkbook instead.
- Politely (and forcefully) decline offers to earn discounts and bonuses for opening new credit card accounts.
- Don’t deviate from your shopping list. Eliminate “Just this once” and “It’s such a good deal” from your vocabulary and rationale for impulse buying.
- When you’ve bought everything on your list, depart the retail scene. Don’t hang around to browse. If you’re shopping with a friend who suggests having coffee or lunch, leave the mall, and pay cash for your meal or refreshments.
Getting Debt Help: Debt Consolidation and Credit Counseling
For many, using self control with spending is not a strong point (you didn’t get into credit card debt by “just saying no.”) If you’ve tried unsuccessfully to pay off credit card debt, getting debt help from a credit counseling service can help you establish a budget and an affordable debt repayment plan. Credit counselors typically work with all of your creditors to develop your plan. You pay the credit counseling service, and they distribute funds to credit card companies according to your payment agreement. Don’t hesitate to get debt help if you’re struggling; the sooner you find a solution the sooner you can be free of credit card debt.