How to Pay off College Debt during a Recession

The burden of college debt is pressing down on the shoulders of graduates harder than ever with the added pressures of the recent recession.

Paying off debt is a case of forming a good plan of action and seeing it through. Being recently graduated means that you are unlikely to be earning big wages. The increased financial squeeze of the recession can make paying off debts seem like a dream rather than a solid day to day aim but paying a debt off in pressured circumstances is still down to the same process of planning and action. The plan will just be more extensive than in other, easier, circumstances.

Even in these pressured circumstances paying off a college debt is achievable. Even the fact that you are choosing to try and pay off the debt rather than shelve it during hard times marks you as someone that can easily make this mission work.

Many people are tempted to keep putting off paying back college debt because the option exists to do so. Regular interest charges can become something you pay without second thought since the minimum charge is much less than the total amount owed.

All this approach does, however, is drain your finances continually. It’s not just the fact that you will pay huge amounts of interest over time but you need to consider that all those charges will negatively impact the chance to make savings and investments over the pay off period.

For some people any excuse is a good one. Debt rolls over because of a recession, a new baby, or due to loss of a vehicle. Recession or no recession getting rid of debt is a positive and important life decision.

If you have recently been a student you should be familiar with how to get by on minimal spending if you need to. What you may not be familiar with is the ins and outs of various tax rates, the disadvantages of certain types of credit and the consequences of skimping on spending on items such as insurance. Many graduates fall into financial traps due to inexperience with financial matters.

Establish a support group in order to avoid making mistakes. This could be made up of friends who have successfully beaten their student debt, older family members or a public support group on or off line which you can use as a forum for questions.

Bad deals can look good on paper and even great deals can be the wrong decision if your circumstances are not aligned with the advantages the deal presents. Set yourself up with a good way of getting feedback and information on everything from your creditors to your bank to your insurance provider. Don’t be one of the people that makes a big mistake.

In order to pay off your debts you will need to boost your income and cut your expenses down as far as possible in order to establish a budget which can be used for making monthly repayments.

First of all make an overview of the debt or debts you have. List the amount owed, the company to whom it is owed, the interest rate and any other relevant details. This overview shows you the goal to be achieved.

Consider the option of moving debt around. If you have a large outstanding balance on a credit card, for example, you would be much better off getting a low interest loan and transferring your debt to the loan. By shuffling the debt around to low interest options you can potentially improve your situation before you even start paying back the money.

Next make a list of all your expenses. When making an overview of expenses it’s important to list everything that is outgoing. It’s tempting to leave items off because you want to prevent them from entering the system of elimination and downsizing. If you are serious about beating debt and having secure finances throughout your life then you need to take a full on approach.

You need not see reducing your expenses in terms of sacrifice but in terms of life long improvement. If you develop the habit of living above your means and do not train your ability to home in on damaging costs and eliminate them then you are setting yourself up for a life time of debt and being unable to afford what you want and even what you need.

People who never consider their budget seriously get overly attached to meaningless purchases. They are so unused to cutting out expenses here and there that they let the chance of financial freedom for their entire life slip through their fingers. Don’t let this happen to you and be serious about your expenses budget.

Go through the list of what you spend and eliminate everything which is unnecessary. After this go through your necessary expenses and reduce them as much as possible. For example you might eliminate the unnecessary expense of buying a coffee out every morning and you might reduce the necessary expense of living arrangements by finding a cheaper place to live.

Once your expenses budget has been minimized you need to try and boost your incoming funds.

Increasing income can be very difficult as a recent graduate. Many career paths involve doing volunteer work or working for very low pay early on. For this reason increasing income in this situation comes down to balance.

If you think your career would benefit from doing free or low paid work consider if you can manage some paid work alongside it. Can you find a volunteer opportunity that will cover bed and board while you work? Can you work long hours in a regular job to pay the debt off and build up some secure funds before doing the volunteer work?

Understandably some people do not want their CV to reflect a deviation from their career path even if they have a good reason for it. Think carefully about whether you can find related work without giving up good wages.

At this point you need to think with a combination of practicality and imagination. This will be as positive in a future job interview as any specific work experience. Think about whether you can do some tutoring, officially or unofficially, for students at the college you graduated from. Is there a local community college that you could give sessions at? Can you interview the students first to see what kind of classes would be well attended before you try and set one up?

Has your course given you any skills that you can put into practice to earn money either alongside other work or in place of it?

When it comes to expanding income you need to adopt a “can do” attitude. If something doesn’t work you shouldn’t sit down and give up. Question and analyze why it did not work. What can you change to get a better result? Developing a strong practical ability to improve your life situation is something that will benefit you for the rest of your life.

Once you have completed these steps you will have a monthly budget for making debt repayments. Make contact with the companies you owe to and explain your plan to make monthly payments. Get their assurance that the debt will not be sold on before you can pay it off.

Each month pay back as much as you reasonably can. It’s important to pay more when funds allow but at the same time you don’t want to run your finances too close to the ground in case something unexpected happens and you start acquiring charges left, right and center.

Maintain a good financial cushion in your bank account and keep careful track of your transactions and available funds. You want to avoid bouncing payments at all costs. It will not just mean extra charges but your creditors will lose sympathy with you very quickly if you allow your credibility to be damaged in this way.

As you make progress with paying off your debt you will make more of an impact with your repayments as the interest owed will be lower each time. At this stage you can relax your spending but make sure you apportion funds to savings and secure investments. Building up your financial security means you can avoid debt in the future.

The process of paying off debt is a great financial education that leaves you better at managing your money and avoiding living above your means. Setting out to pay off college debt during a recession is a much harder mission but still an achievable one. If you can overcome this hurdle you can be sure that whatever the future has in store you will be able to manage your finances accordingly.