|
This month, colleges and universities across Ohio begin graduation ceremonies. In the Treasurer’s Office we feel the impact of this event as some interns leave us to begin their careers. To help prepare these young people for their upcoming financial independence, we want to share some tips.
Keep in mind that nobody is too young or too old to gain more insight into our own finances. Regrettably, college graduates today are more indebted than at any time in the past. The average graduate owes $20,000 in student loans, and the interest rates have been rising. Thanks in part to the high visibility of credit card companies on college campuses (offering free T-shirts and other goodies to students who apply for credit cards), the average graduate owes another $3,000 to creditors. Between student loan debt and consumer debt, new graduates enter the job market with an average credit load of $23,000. With their annual salary around $30,000, it may take decades to erase their debts by paying the monthly minimum amount. Often they struggle to pay the rent and bills, buy food, and still bear their debt burden. In the Treasurer’s office, we can offer advice to those entering the work force on how to manage it most effectively. - For everyone (not just recent graduates), it is important to make at least the minimum payment, on time, each month, to your creditors. Skipping payments or making them behind schedule can lead to a host of late fees and other penalties and even increase the interest rate on other cards. Late payments will impact credit scores, which may make it more difficult and more expensive to procure a mortgage or car loan in the future.
- If you have a clean credit history but are unable to make a payment or make it on time, call the credit card company and ask to have the late fees waived for that month in consideration of your good habits in the past.
- If you have money to make more than just the minimum payment, pay more toward the debt with the highest interest rate, probably a credit card. If you can, consolidate your debt on to fewer cards at the lowest interest rates you can find. But beware of cards advertising low introductory rates that sky-rocket after a few months. Make as large a payment as you can each month, and minimize new charges because it is difficult to become debt-free if you keep digging a deeper hole.
- If you have been making at least the minimum payment on time for several years, call the credit card company and ask if they are able to offer you a lower interest rate.
- As you pay off your debt, remember to save a little, too. Thanks to compounding interest, by saving money each year for ten years when you are just out of school, you will have more money at retirement than if you save the same amount of money each year for 30 years after you turn 30. This is also time to put away money for a down payment on a house that will lower your mortgage rate later.
- Saving money and lowering debt could be easier now than it will be later in life. Young people are more used to cost-saving measures like taking the bus and having a roommate. Other strategies, such as making your own morning coffee, packing lunch, and creating a budget, make it possible even to increase your savings. Many recent graduates do not yet have large obligations, like a family and a mortgage, that can hinder saving.
Finally, help is on the way for future graduates. We are working with The Ohio State University to create a Student Center for Financial Life and Research, and we are working with other Ohio colleges and universities to set up financial wellness centers on their campuses. In the future, these centers will create opportunities for all students to learn more about managing their money and be a particularly important resource for those in financial trouble. For those just finishing college now, however, we in the Treasury wish you luck and a stable financial future. |
Your Money NOW 
College
