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Get on top of your debt
posted in: Financial Wellness
by Jenna Allen

Four ways a 20-something can manage their debt

In their article “Wiping out debt is a top priority for millennials” by the Harvard University Employees Credit Union, they reported that “two-thirds of millennials said they have made getting out of debt a top priority. This ranks just above minimizing financial stress, spending less than they earn and having an emergency savings fund.”[1] Yet despite being one of the most educated generations, “only 24 percent of young adults born between the early 1980s and mid-1990s exhibited basic financial literacy.”[2]

One of the problems is that 20-somethings don’t want to make any lifestyle changes to compensate for their loans and debt. They want to live their life on their terms, even if that means dealing with loan payments monthly. Another problem is that some young adults don’t even know how much of their annual income is going to their student loans – it’s about 18%, on average – and those who do know how much they owe are clueless on the interest rate they pay.[3] And along with the long term debt of student loans, a lot of millennials also carry short term debt, usually from credit cards, but also in the form of “alternative financial services, such as auto title loans, payday loans, pawnshops, rent-to-own loans and tax-refund advances.”[4] 

So how to tackle the problem of mounting debt in this generation, that owes too much but knows too little? Here are a few places to start:

Know what you owe. Whether it’s keeping track of your monthly spending with credit card notifications, or checking on your student loans on sites such as The National Student Loan Data System (www.nslds.ed.gov) or your annual credit report (www.annualcreditreport.com), knowing what you’re up against is the first hurdle to tackling your debt.

Get educated. A lot of universities are offering financial literacy courses these days, allowing you to become debt savvy before you’ve even left school. Taking courses after graduation online or through community colleges is also an option.

Refinance. Often graduates  can qualify for better rates once they’re out of school and into the working world than they first received when they had no income at the start of school. If refinancing isn’t part of your plan, your should definitely take a second look at your loans.

Seek loan forgiveness. Some employment offers student loan forgiveness, such as public defenders, law enforcement officers, doctors, nurses, and some teachers. Volunteering can also work as “many organizations like the Peace Corps and AmeriCorps offer eligibility for student loan payments through Public Service Loan Forgiveness (PSLF) or other options.”[5]

What ways are you working on to pay off your loans, and will you use any of the above strategies?

 

[1] “Wiping out debt is a top priority for millennials.” Huecu.org

[2] “Report shows millennials have high debt and little savings.” Phys.org

[3] “Millennials face debt, and denial.” Reuters.com

[4] “The alarming facts about millennials and debt.” Blogs.wsj.com

[5] “Millennials face debt, and denial.” Reuters.com

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