The proudest day of Seth’s life was the day he graduated from college with a degree in business. He wasn’t the first in his family to have a college degree, but he had been waiting for this day for what had seemed like forever. Six months after graduation, Seth got a job as an assistant manager at a retail store, but he started to freak out when he got his mail one day. Among his magazine subscriptions, mail-order movie rentals, and small stack of bills was a new bill to begin paying back his student loans.
“How am I going to afford this?” Seth thought to himself. The reality was that he could not. To pay back his many debts, Seth had to move back home with his parents and swallow his pride. All Seth could think about when he looked at his student loan bill was, “Where did I go wrong?”
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According to a 2010 report in Education Week magazine, many young recent college graduates have the same struggles as Seth. In addition to the diplomas they receive for their achievements, as many as 66 percent of college grads also walk away with at least $35,000 of debt to repay. In 2008, it was clear that such heavy debt burdens were having a negative effect: according to the U.S. Department of Education, up to 7.2 percent of college graduates that year defaulted on their student loans, meaning that they missed making at least one payment and/or went into “delinquent” status. As the consequences that result can echo across one’s ability to get credit for years, it’s important that students know what they’re getting into when they take out loans to cover education costs.
While student loans are considered a “good debt” because the interest paid on them are tax-deductible (meaning that individuals and/or their families can subtract their payment amounts from annual taxes), they’re not the sort of things you should just jump into.
Here are a few ways to make sure you graduate with an amount of debt you can handle:
While taking out a student loan to pay for college is not a bad thing, do your homework about the financial options available to you and stick to a budget. The last thing you want to become, remember, is a future financial-crisis statistic.