Tag Archives: student loans

Student Loans, Credit Cards & Mortgages, Oh My: How Recent Grads Can Find Financial Peace

If you owe a lot, you’re not alone. Today’s consumer owes an average of $28,000 on credit cards and loans, according to Experian’s latest annual State of Credit report, and that’s not even counting mortgage debt. If you’re a recent college grad carrying this type of financial load and wondering what to pay off first, you should know that all debt is not equal. You can pay off what you owe more effectively if you pursue an informed repayment strategy.

Student Loan Debt piggy cap

The average student loan debt rose to $29,400 last year, according to the most recent Project on Student Debt statistics. Repaying your college bills can be tough if you don’t graduate or if you have trouble finding work after graduation. Also, federal student loan interest rates have been rising, resulting in 30 percent of borrowers getting 90 days or more behind their repayments, according to the Federal Reserve Bank of New York.

However, this summer Congress passed legislation to lower and cap interest rates. Other legislation has been pushing to make education more affordable, and student loans have more flexible repayment schedules and options than other types of debts, with hardship deferment and other forms of assistance available. The U.S. Department of Education Federal Student Aid guide can help you develop a repayment plan.

Credit Card Debt

The average American household owes $7,128 on credit cards, according to the latest Federal Reserve data. When deeply indebted cardholders are factored in, this grows to $15,279, making credit cards the third-highest source of indebtedness after mortgages and student loans. Credit card interest rates can run high, and if you only pay your minimums, you can end up stuck in debt for a long time paying off much more than you borrowed.

Your best bet with credit cards is to get a card with a low interest rate and repay what you borrow as soon as possible. If you have significant credit debt, consider your options for paying it off faster to avoid future interest. If you currently receive regular payments from a structured settlement or annuity, a company like J.G. Wentworth can buy your structured settlement for a lump sum of cash now. You can use this money to pay down your credit card debt and save you future interest.

Mortgage Debt

Mortgage debt varies regionally with the cost of real estate and living expenses. If you live in the Midwest, the average mortgage balance is $143,850, according to this year’s SaveUp’s U.S. Consumer Savings and Debt Report. If you live in the West, where the cost of living is much higher, the average is $255,979. No matter where you live, mortgage debts carry the largest balance of all type of debt and take the longest to pay back. Combined with the risk of lost equity, this can make mortgage obligations potentially the worst type of all debt.

On the other hand, you may be able to use your equity to lower interest rates and consolidate credit card balances. You may also be able to refinance to a shorter-term loan to pay off your mortgage sooner. Financial expert Dave Ramsey suggests pursuing early mortgage repayment after you’ve paid down other debts with lower balances.

Bob Howell is a financial counselor from the Southwest who helps families dig out of debt.

Paying Down the Student Loan

debt movement 2013 10 million

debt movement 2013 10 million

Today starts the challenge part of The Debt Movement, so I want to share my goal for the next 90 days along with our starting point and our plan to knock this debt down.

Looking at $19k in Debt Left

Jeff Rose from Good Financial Cents and  Ready for Zero have teamed up for a massive project; helping people to pay off $10 million dollars of debt paid off in 90 days. For my part I’m contributing my $19,000 student loan as a part of the challenge. I’m hoping that this group effort can speed up our goal of getting rid of this debt.

As far as getting a starting point, I just logged into my account to get the exact balance and as of today, it stands at $19,222.62. 

Paying Off $2,500 in 90 Days

Though the interest rate is low, we really want to improve our monthly cash flow in the long run. However we don’t want to pause our retirement contributions, so that means we have to cut other expenses and look for ways to earn a bit of income to get this loan eliminated.

As far as earning a bit of income, we have some cash this past week by selling our Jetta through Craigslist. We decided to take a chunk of this money and use it to an additional payment on the student loan. I’m scheduling a payment next week. I’ll also look for ways to sell some of our stuff and get a bit more cash.

We have redirected the extra payments we were sending in for the mortgage and now they are going towards the student loan. It is my hope that this will help us to get rid of this debt in 3 years or less.

Thoughts on Earning More and Paying Down Debt

If you have any ideas on earning a bit more money to pay down the loan, please let me know in the comments. If you’re interested in being a part of The Debt Movement, go ahead and sign up today to be a part of this massive challenge.

More good news: If you’re committed to paying down your debt this year, sign up for $15,000 worth of Debt Scholarships to speed up the process even more