Personal Finance Check-up: Student Loan Debt

It's graduation season across the country and undoubtedly you've racked up quite a sizable amount of debt. The premise behind amassing student debt is to improve your quality of life. As you're considering your options and prepare for the inevitability of moving to another city, you've probably wondered how this massive amount of student loan debt will effect your ability to purchase a home. Maybe homeownership is not on your to-do list just yet but it will be.

And now is as good of a time as any to consider its impact on your credit and ability to purchase big ticket items. As you know, a good credit score is the key to being able to qualify for any loan. The higher the credit score, the likelihood that you will be approved.  Be aware that defaulting on your student loans can have grave consequences.  Your lender can assign your loan to a collection agency who will hound you to the ends of the Earth, garnish your wages, or take possession of your federal and state income tax refunds.  This can all be avoided by knowing the options available to you.  Taking care of your personal finances is the key to achieving your long-term goals.

So, how does student loan debt fit into your credit worthiness?
As a new grad, you have the ability to defer the loans at least for a time while you look for employment. Take advantage of this because the job market is very tenuous in some places.

• Make a plan.  Before you have to begin making your monthly payments, research your options.  This will likely mean that you have to put off a new car for a while and continue living with your parents.  Either way, you want to make sure that you utilize every available avenue so that you don't default on your loans
• Consider consolidating your loans (undergraduate and graduate).  Not all lenders offer student loan consolidation programs.
• As you relocate, ensure that you update your contact information for your lender.  If you miss any payments, they will contact you but you will also be notified about important changes and promotions that can affect your monthly payments.
• Look for student loan forgiveness programs.  These professions may not have high starting salaries but it is an opportunity to have a significant amount of debt eliminated.
• Find out if you qualify for any special programs and a fixed interest rate. This can ensure that your monthly payments are stable at least for a time.
• Don't neglect your savings.  While it may seem an impossible feat to manage paying your student loans every month coupled with other living expenses, it is still possible to start saving for the future.

Neglecting your student loans is a NEVER a good idea.  Aside from being reported to the credit bureaus, sent to collections, and lower credit scores, you will rack up thousands of dollars in late fees and other charges.  Eventually, the amount of money to have to repay will be a sum much larger than if you paid your monthly bill or negotiated another payment arrangement with your lender.  You can recover from defaulting on your student loans and begin improving your credit worthiness.  There are federal programs that have been developed to help students through financial hardships without adversely impacting your credit rating.  Credit matters and the more knowledgeable you are about your options, the greater chance you have to achieving your personal and career goals.