Don’t Let Students Loans Dictate Your Adult Life
Student loans are rough. But, there are ways you can make your life a little less difficult when it comes to buying a car or house.
Student loans are enough of a hassle as it is, but add the expenses that come along with buying a car, renting an apartment or owning a home and the whole “personal finance’’ thing can feel like a bad joke.
But it is possible for recent college graduates to stay on top of their loan payments while working toward home and auto ownership, as long as they keep their eyes on the important details.
Betsy Mayotte, Director of Regulatory Compliance at American Student Assistance, said there are plenty of resources for students to start planning and budgeting early in their college careers.
Figuring out how much you will need to pay in loans (which you probably won’t need to start paying until 6 months after graduation) and how much your salary will be will help you determine if you can get a car and what your living situation needs to looks like.
The Bureau of Labor Statistics has a website where you can go find average salaries for certain careers, average rent prices, and even gas prices – all by location.
Martha Savery, Director of Public Affairs and Communications for the Massachusetts Educational Financing Authority made it clear that students (and their parents) need to be “literate about what financial obligations mean and to sit down before they graduate and before they even sign a loan.’’
“They need to take into consideration what their debt-to-income ratio will be,’’ Mayotte said. “Car and home creditors look at that before giving car loans and mortgages.’’
Debt-to-income ratio measures the balance between the amount of money you owe and the amount of money you earn. It can show a lender if you will be able to pay the new loan you are looking for. The lower your ratio is, the more likely you’ll be approved for an auto loan or a mortgage.
Gordon Oliver, a certified credit councilor for Cambridge Credit Counseling, urged people with student loans to ease themselves into home and car expenses, rather than take everything on at once.
“Always try to live with a roommate or two to cut expenses,’’ Oliver said. “In a reasonable neighborhood that is close to where they are working.’’
Savery said that one way to avoid rental costs and to start saving while paying back loans is to move back home for a year.
“It is being realistic,’’ she said. “Many students, my own children included, lived at home for a year or so in order to get financial legs underneath them.’’
The common theme here seems to be that there are a lot of options, especially when dealing with federal loans, and there are plenty of resources on the Internet and opportunities to speak with loan counselors to get your questions answered and a budget in plan.
“If [students] believe they will have difficulty in meeting repayment obligations, don’t wait for the bottom to fall out,’’ Savery said. “Pick up the phone and call the lender and have a conversation with them. The worst thing students can do is stick their head in the sand.’’
Not panicking becomes a lot easier when you have a plan and a functioning, realistic budget – you have resources and there are loan forgiveness programs.
“I just see a lot of people with the ‘ruin my life’ frame of mind,’’ Mayotte said. “Take a deep breath. It can be manageable and it is not worth panicking over. No matter what there is a light at the end of the tunnel.’’
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